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Canada & US Labor Market Data: Forex Market Volatility Expected
Canada and United States labor market data released today (05/06/2026) has increased the possibility of strong volatility in the forex market. Canada’s Employment Change came in at 10.6K, while the market was expecting a decline of -17.7K, showing a much better-than-expected performance in the labor market. At the same time, the Unemployment Rate remained stable at 6.9%. This data is being considered positive for the Canadian Dollar and strength may be seen in CAD.
On the US side, Average Hourly Earnings came in at 0.3%, better than the 0.2% forecast, but the most important NFP report showed only 85K jobs added while the market was expecting 115K. The Unemployment Rate remained unchanged at 4.3%. In my view, strong wage growth will try to support the USD, but weak NFP data may keep pressure on the dollar. If the market gives more importance to the jobs data, USD may appear weak and CAD relatively strong, which could lead to bearish movement in USDCAD.
Major Forex Currency Pair Outlook
EUR/USD is trading around 1.1616 and today’s price action is reflecting dollar weakness. US NFP came in at 85K while the forecast was 115K, which is keeping pressure on the USD. In my opinion, as long as the currency pair holds above 1.1600, buyers may remain in control and the market may try to move toward the 1.1650 – 1.1700 area.
GBP/USD is trading strongly at the 1.3429 level. Weak US labor data has supported the pair and dollar sellers appear active. In my view, if the pair sustains above 1.3400, bullish momentum may continue and buyers may target higher levels. A pause in this rally may only be seen if the dollar recovers.
USD/JPY is trading around 159.93 and selling pressure is being seen in the pair. Along with weak NFP, the market appears to be shifting toward safe-haven currencies, benefiting the JPY. In my opinion, as long as US data sentiment remains weak, a downside correction may be seen in USD/JPY and sellers may remain dominant in the market.
US Dollar Index (DXY):
The biggest factor for the dollar today has been the NFP report, which came in at 85K while the market was expecting 115K. Although Average Hourly Earnings remained at 0.3%, better than the 0.2% forecast, traders currently appear to be focusing more on weak job growth. In my opinion, short-term pressure may remain on the DXY and until a strong bullish catalyst emerges, recovery in the dollar may appear limited.
Federal Reserve (Fed) Testimony & USD Impact
The latest testimony from the Federal Reserve described the banking system as sound and resilient, with strong bank capital strength and liquidity buffers. The Fed also highlighted that lending growth and profitability in the banking sector remain stable, but the share of non-bank financial institutions (NBFIs) is increasing rapidly, affecting competition with traditional banks. At the same time, the Fed’s focus on AI and cybersecurity risks is clear, as it aims to modernize the financial system while maintaining stability. Overall, the tone provides medium-term support to the USD, as financial system stability and regulatory clarity send a positive signal.
Bank of Japan (BOJ) Consumption Focus & JPY Outlook
On the other hand, the Bank of Japan (BOJ) has focused on private consumption, which is approximately 50% of Japan’s GDP. The BOJ’s Consumption Activity Index (CAI) measures short-term consumption activity of goods and services, which provides an idea of the economy’s business cycle. The BOJ’s data approach shows that the main driver of growth in the Japanese economy is domestic demand, therefore consumption data will be an important signal for the future direction of the yen. If consumption remains strong, the JPY may get support, whereas weak consumption will keep the BOJ on an accommodative stance, due to which the yen may remain under pressure.
Most Recent News
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of six major currencies, has snapped its losing streak that began on April 6. It is currently trading near 98.20 during Thursday’s European session.
The US Dollar is finding modest support as traders remain cautious about the ongoing situation in the Strait of Hormuz. The region continues to face uncertainty, with shipping routes effectively constrained under a dual blockade. However, Iran may permit limited vessel movement through the Omani side if an agreement is reached to avoid further escalation.
Despite this support, the Greenback could face renewed pressure as safe-haven demand weakens amid rising hopes of easing tensions in the Middle East. US President Donald Trump recently indicated that the conflict is “close to over.” Reports have also suggested a potential extension of the ceasefire by two weeks, although Trump signaled that ongoing negotiations may make such measures unnecessary.
At the same time, declining energy prices have helped ease inflation concerns, reducing expectations of further tightening by the Federal Reserve. Markets widely anticipate that the Fed will keep interest rates unchanged this month and possibly for the rest of the year.
Cleveland Fed President Beth Hammack stated in a CNBC interview that the key factor to monitor is the duration and extent of elevated energy prices. Meanwhile, St. Louis Fed President Alberto Musalem noted that the recent oil shock linked to Middle East tensions is contributing to core inflation, which is expected to remain close to 3% throughout the year.
Oil prices climbed during the Asian session after the US military announced a complete blockade of the Strait of Hormuz on Tuesday. The move tightened supply concerns and cast doubt over the next round of negotiations with Iran. As a result, US benchmark West Texas Intermediate (WTI) surged by around $4, recovering earlier losses and approaching the $89.00 level.
Earlier, WTI had dropped nearly 8% over the past two days, hitting a three-week low of $84.86 amid speculation that the US and Iran were maintaining communication to restart peace talks. Those expectations were later reinforced when US President Donald Trump indicated that negotiations could resume within the next two days.
From a technical standpoint, WTI remains under bearish pressure within a broader sideways channel. Support near $84.50 is currently holding the downside.
On the 4-hour chart, indicators continue to signal weakness. The Relative Strength Index (RSI) has bounced from oversold levels but remains below 50, while the Moving Average Convergence Divergence (MACD) still shows a widening negative histogram, reflecting weak momentum.
A decisive break below $84.46 could open the door for a deeper correction, with potential targets at the psychological $80.00 level and the March 10 low around $76.00. On the upside, resistance is seen at the weekly high of $98.10, followed by the April 6–7 highs near $106.28, and the March 9 peak at $113.16.
Asian stock markets posted strong gains on Tuesday, supported by improving sentiment after comments from United States (US) President Donald Trump and Vice President JD Vance suggested that recent talks with Iran were not entirely unsuccessful. This boosted demand for risk-sensitive assets across the region.
At the time of writing, Japan’s Nikkei 225 surged more than 2.5% to approach the 58,000 mark. China’s Shanghai Composite advanced around 0.55%, trading slightly above 4,000, while Hong Kong’s Hang Seng Index climbed 0.5% to near 25,785.
Meanwhile, Indian equity markets remained closed on Tuesday in observance of Dr. Baba Saheb Ambedkar Jayanti.
On Monday, President Trump stated during a press conference that Iran is “very eager” to reach an agreement, while also confirming that US naval forces have imposed a blockade on Iranian ports.
Earlier, Vice President Vance noted in an interview with Fox News that the initial round of negotiations held in Pakistan over the weekend provided “valuable insight” into Iran’s negotiating strategy. However, he emphasized that key conditions—including Iran abandoning its nuclear ambitions and reopening the Strait of Hormuz—remain non-negotiable for the US.
Additionally, a CNN report indicated that US officials are internally considering the possibility of a second, face-to-face meeting with Iranian representatives before the two-week ceasefire deadline on April 21. However, it remains uncertain whether such talks will take place.
Looking ahead, investors are expected to closely monitor the upcoming meeting between Lebanese Ambassador Nada Hamadeh and Israeli Ambassador Yechiel Leiter in Washington, DC, scheduled for 15:00 GMT.
The EUR/CAD pair is trading close to the 1.6200 level during Monday’s Asian session, recovering slightly from earlier losses. Despite the minor rebound, the pair remains under pressure as the Euro continues to struggle in a risk-averse market environment.
Investor sentiment has turned cautious after the latest round of US–Iran peace talks ended without any agreement. US Vice President JD Vance confirmed that negotiations in Islamabad concluded unsuccessfully after nearly 21 hours of discussions. Adding to market concerns, President Donald Trump announced that a blockade on ships entering and exiting Iranian ports would take effect on April 13 at 10:00 AM ET.
Meanwhile, inflation in the Eurozone has picked up pace, rising to 2.5% in March — its highest level since January 2025 — largely driven by higher energy costs. This remains above the European Central Bank’s 2% target. ECB President Christine Lagarde reiterated that monetary policy will stay restrictive until inflation shows a sustained move back toward the target level.
Analysts at Nordea, including Jan von Gerich and Tuuli Koivu, have projected four rate hikes of 25 basis points starting from June. They highlighted that underlying inflation pressures remain strong, and even a potential easing of geopolitical tensions may not remove the need for further tightening.
On the other hand, the Canadian Dollar is finding support from rising oil prices, which is typical given Canada’s strong position as a major crude exporter to the United States. Oil prices have surged more than 7%, with West Texas Intermediate (WTI) trading near $96.90 per barrel. The rally in crude is fueled by escalating US–Iran tensions and growing fears of a possible disruption in the Strait of Hormuz.
Gold (XAU/USD) continues to trade on a weaker note after failing to break above the $4,800 level in the previous session. However, the downside remains limited as the metal moves within a familiar range during Friday’s Asian session. Prices are holding above $4,750 as traders stay cautious ahead of the upcoming US Consumer Price Index (CPI) report, which is expected to provide clearer direction.
Market expectations suggest that inflation likely increased in March, driven by the recent surge in Crude Oil prices linked to geopolitical tensions. This could reduce the chances of near-term rate cuts by the US Federal Reserve. Supporting this view, the FOMC meeting minutes from March indicated that policymakers are not in a hurry to ease monetary policy due to persistent inflation risks, particularly those stemming from Middle East energy disruptions. Meanwhile, ongoing tensions around the Strait of Hormuz are lending support to the US Dollar, which continues to weigh on gold prices.
Geopolitical developments remain a key driver. Iran recently halted shipping through the Strait of Hormuz following Israeli strikes in Lebanon, escalating tensions in the region. US President Donald Trump criticized Iran’s handling of the situation and warned of potential military action if negotiations fail. These developments have pushed oil prices higher, adding to inflation concerns and strengthening expectations of a more hawkish Fed stance. Despite this, gold’s decline remains limited due to the lack of strong selling momentum.
At the same time, there are signs of possible diplomatic progress. Israeli Prime Minister Benjamin Netanyahu has called for direct talks with Lebanon, while US officials confirmed that discussions are expected to take place in Washington next week. Additionally, phased US-Iran negotiations are scheduled over the weekend, keeping hopes of a ceasefire alive. This optimism is preventing a sharp rise in the US Dollar and helping gold avoid deeper losses.
Technical Outlook: Gold Moves in a Range with Slight Bearish Bias
From a technical standpoint, gold is showing a neutral to slightly bearish trend as it trades below the 200-period Simple Moving Average (SMA) on the 4-hour chart. This level aligns with the 61.8% Fibonacci retracement of the recent decline, making it a strong resistance zone.
The Relative Strength Index (RSI), currently near 56, suggests mild buying interest after the recent pullback. However, the Moving Average Convergence Divergence (MACD) has slipped slightly into negative territory, indicating fading bullish momentum and reinforcing resistance near $4,883.
If prices manage to break above this resistance zone, the next targets could be around $4,908, followed by $5,131 and $5,415. On the downside, immediate support lies near $4,751. A break below this level could expose further declines toward $4,595 and $4,401, with stronger support seen around $4,087.
The NZD/USD pair finds renewed buying interest after a mild pullback in the previous session, pushing higher for the fourth consecutive day on Thursday. During early European trading, the pair moves toward the 0.5835–0.5840 range, as buyers attempt to break above the important 200-day Simple Moving Average (SMA), despite mixed underlying fundamentals.
The latest minutes from the March 17–18 FOMC meeting, released Wednesday, indicate that policymakers still anticipate one rate cut by the end of this year and another in 2027. This outlook limits the US Dollar’s recovery from its recent one-month low, providing support to NZD/USD. However, ongoing geopolitical tensions continue to lend strength to the USD as a safe-haven asset, potentially restricting further upside in the risk-sensitive Kiwi.
In the Middle East, Israel launched a series of airstrikes across Lebanon, stating that the ceasefire did not apply due to Hezbollah’s involvement. In retaliation, Iran again halted shipping through the Strait of Hormuz and warned it may withdraw from the ceasefire if attacks persist. Additionally, US President Donald Trump signaled the possibility of renewed strikes if negotiations with Iran fail, highlighting continued escalation risks that could favor the USD.
Market participants remain cautious and avoid strong directional positions ahead of key US economic releases. Focus now shifts to the final Q4 GDP data and the closely watched Personal Consumption Expenditures (PCE) Price Index. Furthermore, the US Consumer Price Index (CPI), scheduled for Friday, will provide additional clarity on the Federal Reserve’s policy path. A sustained breakout above the 200-day SMA is required to confirm further bullish momentum in the NZD/USD pair.