FOREX: Dollar - Watch the S&P 500 Next Week, Not the April NFPs

It was an appropriate way to end the week and month. The tattered US dollar slid to its lowest level on a trade-weighted basis since July 30th, 2008 – fully erasing the safe haven premium the currency had built up through the collapse of the housing crisis and the subsequent global financial crisis that followed.

• Dollar: Watch the S&P 500 Next Week, Not the April NFPs
• Euro Traders May Come Back to Reality Next Week after the ECB Holds Rates
• British Pound: What Should we Expect from the BoE and How Will Sterling React?
• Australian Dollar Traders Should Limit Expectations for RBA Decision
• Swiss Franc Rallies on SNB's Hawkishness, Profit on Reserves
• Canadian Dollar Rate and Growth Outlook May Point to Further Gains this Week
• Gold Surges $27 to a Record High and the Dollar Wasn't the Primary Catalyst

Dollar: Watch the S&P 500 Next Week, Not the April NFPs

It was an appropriate way to end the week and month. The tattered US dollar slid to its lowest level on a trade-weighted basis since July 30th, 2008 – fully erasing the safe haven premium the currency had built up through the collapse of the housing crisis and the subsequent global financial crisis that followed. This return to lows is fully aligned with the diminishing fundamental scope of the greenback over time as the currency slowly loses its reserve status, is nudged out by emerging global powerhouses in the Euro and Chinese yuan, and offers no return alongside its excessive liquidity. That said, the five-consecutive months of decline (we have only seen two other periods as bearish as this in the past eight years) for the dollar should give even the most ardent bear reason for pause. Though there are few sources of true fundamental strength the benchmark can tap; there are still a few catalysts that can offer a temporary recovery. That said, does NFPs fit into that column?

Historically, the US non-farm payrolls report is the most consistent market-moving economic indicator. This employment report is one of the few reports that can be considered a leading indicator for the broader health of the US economy, it is one half of the Fed's duel mandate for maintaining monetary policy and it is also easy to understand. That said, the indicator has been rendered impotent when it comes to guiding the dollar this year. The positive influence this data imparts on the currency can be found through interest rate expectations. However, after Fed Chairman Bernanke made clear the group's intentions to keep stimulus in place and the rate ‘exceptionally low' for an ‘extended period' this past week; there is little a boost in employment can really accomplish. Interestingly enough, the best opportunity this indicator has to rally the dollar is if it disappoints. A blow to risk appetite trends could trigger an unwinding of carry positions and demand for a safe haven – both paths to the dollar. Browsing the rest of the docket, the ISM manufacturing activity, service sector survey and ICSC chain store sales figures are noteworthy but ultimately lacking for impact. The market will be happy to keep to its trend unless the tone of risk makes a concerted change in bearing.

Related:Discuss the Dollar in the DailyFX Forum, John's Picks: Still Long GBPUSD Heading into Next Week

Euro Traders May Come Back to Reality Next Week after the ECB Holds Rates

Recently, it seems as if the euro is doing exactly the opposite of what fundamentals would suggest. Over the past weeks, we have seen the financial troubles in the region further entrench themselves and interest rate expectations cool off; while the euro continued its move higher. Yet, this past Friday, a stronger-than-expected Euro Zone consumer inflation reading (a two-and-a-half year high 2.8 percent reading) was met by the first lower close from EURUSD in nine consecutive trading sessions. From a fundamental perspective, this inflation report firms up rate hawks expectations for follow up hikes from the European Central Bank; but the group's limited scope for an aggressive policy effort seems to be sinking into the market's expectations.

Rates will certainly be the topic of conversation next week. Thursday's ECB rate decision may very well be considered a defining point for the euro. A hold is expected by every economist that contributed a forecast to Bloomberg's survey (45) while overnight index swaps show the market is pricing in no chance of a follow-up 25 basis point rate hike. That said, this event still holds incredible potential for its regular post-announcement press conference. Bulls are still holding out for hawkish commentary; so a disappointment here could usher in genuine selling.

British Pound: What Should we Expect from the BoE and How Will Sterling React?

The Bank of England rate decision is due just before its European-region counterpart's verdict; but this timing will do very little for market impact. Unlikely with the ECB's policy efforts, the MPC's decisions have left little to the imagination for those looking to speculate on hikes. No change to the UK benchmark rate and bond purchasing program are fully expected. Yet, the market is rendered totally incapable by the fact that the policy group does not usually release a statement when policy is left untouched. Rate expectations could well find more influence in factory-level inflation, manufacturing activity and service sector output figures due throughout the week than the policy decision itself.

Australian Dollar Traders Should Limit Expectations for RBA Decision

Of the three major central bank decisions due this coming week, the RBA's may be the least market-moving. Where the ECB is looking at a possible shift in a month or two and the Bank of England is dealing with very real inflation pressures; the Australian bank has significant scope to refrain from further hikes to see how its previous string impacts growth alongside natural disasters and global troubles.

Swiss Franc Rallies on SNB's Hawkishness, Profit on Reserves

The Swiss franc is certainly a safe haven; but it also offers remarkable scope for increases to its yield. The SNB rouse rate speculation this past Friday when it was reported that Switzerland's economy was growing faster than expected, the bank made 1.9 billion francs in return from reserves and that the group was ready to move on rates. With a 58 bps forecast for hikes over 12 months, this currency could still move higher.

Canadian Dollar Rate and Growth Outlook May Point to Further Gains this Week

While there are more headline-friendly indicators scheduled for the coming week, the Canadian data carries the best potential for true market impact. The Ivey business activity figures and Friday's labor data can play to growth expectations and the positively-skewed interest rate expectations without much distraction. Outside the Canadian docket, we should watch risk trends, oil prices and the US NFPs.

Gold Surges $27 to a Record High and the Dollar Wasn't the Primary Catalyst

A massive $27 rally from gold (the biggest since December 3rd) isn't in itself astonishing; but the fact this move occurred at record highs, while risk appetite trends were cool and the dollar traced out only modest losses is. Notably, silver would see its own meteoric rise curbed by another hike in margin requirements. Perhaps this is spillover interest from its cheaper cousin; but gold has many appealing attributes at the moment.

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**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

ECONOMIC DATA

Next 24 Hours

GMT	Currency	Release	Survey	Previous	Comments
1:00(Sun)	CNY	PMI Manufacturing (APR)	53.9	53.4	PMI to gain despite PBoC limits
23:01(Sun)	GBP	Hometrack Housing Survey (YoY) (APR)		-3.2%	Residential housing market in all cities expected to continue fall
23:01(Sun)	GBP	Hometrack Housing Survey (MoM) (APR)		-0.1%
23:30(Sun)	AUD	AiG PMI (APR)		47.9	Has declined since 2010 highs
0:30	AUD	TD Securities Inflation (MoM) (APR)		0.6%	Preliminary CPI measure may suggest direction of actual CPI
0:30	AUD	TD Securities Inflation (YoY) (APR)		3.8%
1:00	NZD	ANZ Commodity Price (APR)		4.7%	Prices expected to rise after record metals, energy costs
1:30	AUD	House Price Index (QoQ) (1Q)	-0.5%	0.7%	Slower housing prices may lead to cooling off of AU economy
1:30	AUD	House Price Index (YoY) (1Q)	1.6%	5.8%
1:30	JPY	Labor Cash Earnings (YoY) (MAR)		0.3%	Expected to be unchanged following flat labor markets
5:00	JPY	Vehicle Sales (YoY) (APR)		-37.0%	May be negatively impacted by downturn of manufacturing
6:30	AUD	RBA Commodity Price Index (APR)		101.6	Index at highest levels, expected higher as metals rise faster than Australian dollar
6:30	AUD	RBA Commodity Index SDR (YoY) (APR)		41.3%
7:15	EUR	French PMI Manufacturing (APR)	56.9	56.9	General view of Europe wide PMI and sales indicate slower growing European economy during recovery
7:15	CHF	Retail Sales (Real) (YoY) (APR)		1.5%
7:30	CHF	SVME-Purchasing Managers Index (MAR)	60	59.3
7:45	EUR	Italian PMI Manufacturing (APR)		56.2
7:55	EUR	German PMI Manufacturing (APR)		61.7
8:00	EUR	Italian Hourly Wages (MoM) (MAR)		0.0%	Flat jobs data reported last week may indicate no change
8:00	EUR	Italian Hourly Wages (YoY) (MAR)		2.1%
8:00	EUR	Euro-Zone PMI Manufacturing (APR)	57.7	57.7	Zone-wide PMI expected flat as German manufacturing slows
12:30	CAD	Industrial Product Price (MoM) (MAR)		0.7%	Raw materials expected to increase with general rise in commodities
12:30	CAD	Raw Materials Price Index (MoM) (MAR)		1.8%
14:00	USD	Construction Spending (MoM) (MAR)	0.3%	-1.4%	Decline in residential house prices expected not to affect construction
14:00	USD	ISM Manufacturing (APR)	59.6	61.2	Manufacturing level expected to fall after slower GDP, spending
14:00	USD	ISM Prices Paid (APR)	83	85
16:00	EUR	Italian New Car Registrations (YoY) (APR)		-27.6%	May improve from currently decline rate, lowest in recent years
17:00	EUR	Italian Budget Balance (euros) (APR)		-21.0B	Budget gap may close as cuts slowly implemented
17:00	EUR	Italian Budget Balance (euros) (YTD) (APR)		-31.3B
22:45	NZD	Private Wages ex Overtime (QoQ) (1Q)	0.5%	0.6%	Wages expected flat after labor market shows little change
22:45	NZD	Average Hourly Earnings (QoQ) (1Q)	0.5%	0.6%
22:45	NZD	Private Wages Inc Overtime (QoQ)(1Q)	0.6%	0.6%
23:01	GBP	Lloyds Business Barometer (APR)		1	Business conditions may follow European confidence lower

GMT	Currency	Upcoming Events & Speeches
16:30	USD	Fed's Bernanke Speaks at Fed Community-Affairs Conference

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE - 18:00 GMT

Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist 2	1.5160	1.6750	89.00	0.9345	1.0275	1.1800	0.8400	127.60	146.05
Resist 1	1.4795	1.6600	86.00	0.8900	1.0000	1.1000	0.8215	125.90	140.00
Spot	1.4815	1.6703	81.14	0.8652	0.9459	1.0968	0.8095	120.20	135.52
Support 1	1.4000	1.6200	80.00	0.8700	0.9500	1.0400	0.7825	115.70	125.00
Support 2	1.3700	1.5750	75.00	0.8600	0.9055	1.0200	0.6850	105.50	119.00

CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

Currency	USD/MXN	USD/TRY	USD/ZAR	USD/HKD	USD/SGD		Currency	USD/SEK	USD/DKK	USD/NOK
Resist 2	13.8500	1.6575	7.4025	7.8165	1.3650		Resist 2	7.5800	5.6625	6.1150
Resist 1	12.5000	1.6300	7.3500	7.8075	1.3250		Resist 1	6.5175	5.3100	5.7075
Spot	11.5089	1.5210	6.5653	7.7661	1.2240		Spot	6.0400	5.0340	5.2457
Support 1	11.5200	1.5040	6.5575	7.7490	1.2145		Support 1	6.0800	5.1050	5.3040
Support 2	11.4400	1.4725	6.4295	7.7450	1.2000		Support 2	5.8085	4.9115	4.9410

INTRA-DAY PIVOT POINTS 18:00 GMT

Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist 2	1.4906	1.6781	81.89	0.8798	0.9586	1.1039	0.8173	121.51	136.42
Resist 1	1.4861	1.6742	81.52	0.8725	0.9523	1.1003	0.8134	120.86	135.97
Pivot	1.4832	1.6683	81.28	0.8676	0.9486	1.0943	0.8069	120.48	135.58
Support 1	1.4787	1.6644	80.91	0.8603	0.9423	1.0907	0.8030	119.83	135.13
Support 2	1.4758	1.6585	80.67	0.8554	0.9386	1.0847	0.7965	119.45	134.75

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist. 3	1.4995	1.6859	82.06	0.8758	0.9548	1.1112	0.8205	121.98	137.53
Resist. 2	1.4950	1.6820	81.83	0.8732	0.9526	1.1076	0.8177	121.54	137.03
Resist. 1	1.4905	1.6781	81.60	0.8705	0.9504	1.1040	0.8150	121.09	136.52
Spot	1.4815	1.6703	81.14	0.8652	0.9459	1.0968	0.8095	120.20	135.52
Support 1	1.4725	1.6625	80.68	0.8599	0.9414	1.0896	0.8040	119.31	134.52
Support 2	1.4680	1.6586	80.45	0.8572	0.9392	1.0860	0.8013	118.86	134.01
Support 3	1.4635	1.6547	80.22	0.8546	0.9370	1.0824	0.7985	118.42	133.51

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Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com

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