FX Daily Strategy: Asia, Jun 5th

We expect May’s non-farm payroll to rise by 85k overall and by 90k in the private sector, less strong than in March and April but still showing a healthy labor market given a lack of growth in the labor force, leaving unemployment at 4.3% for a third straight month. We expect a 0.3% rise in in average hourly earnings, slightly firmer than two preceding gains of 0.2%.  

A rise of 85k would still be stronger than April’s 3-month average of 48k and its 6-month average of 55k. For the private sector the 3-month average is 55k and the 6-month average 68k, with trend in government getting less negative now that the DOGE cuts are done.

We expect Canadian employment to increase by 10k in May, which after a fall of 17.7k in April would leave trend looking subdued, if not as weak as three declines in the last four months have implied. We expect unemployment to remain at 6.9% after increasing in April from 6.7% in March. This would be consistent with an economy seeing modest GDP growth in Q2, insufficient to make a significant dent in the output gap. The hit from tariffs is fading while higher energy prices will have a mixed impact on Canadian GDP, but will probably act as a net restraint on job growth. January and February weakness was probably influenced by weather but can also be seen as corrective from overstated gains in September. October and November of 2025, each of which exceeded 50k.  

Despite latest reports of potential June hike, the JPY failed to gain traction. Market participants have been pricing in a June hike to 80%, which means there is less anticipation bids. Moreover, most do not see further hike from the BoJ in the coming year, cutting the legs of JPY. What is more important is the fiscal health of Japan. That will likely deteriorate after the extra trillions of JPY supplementary budget debt. Market confidence in Japanese fiscal picture has been soft in the past months and could see another spike in yields soon and a subsequent drop in JPY.

On the chart, probes above the 160.00 figure to reach 160.09 high has given way to consolidation. However, bullish gains from the 155.00 May low suggest room for further gains to retest resistance at 160.46/160.72, March and April current year high. Would expect these to cap and give way to fresh selling pressure later. Meanwhile, support is raised to the 159.00 congestion and this extend to the 158.60, 18 May low. Would take break of these to fade the upside pressure and open up room for deeper pullback to the strong support at the 158.00/157.50 area