Two Spots Where USD Couldn’t Rally

News is the ultimate market indicator and unabashed good news is a great way to view the undercurrents in the market. Non-farm payrolls were undeniably good and gave the US dollar a lift, except against the pound and loonie. The lack of sustained gains in those pairs is a telltale sign of underlying demand.

Let's start with the news. Non-farm payrolls rose a sparkling 288K compared to 212K expected. The unemployment rate fell two ticks to 6.1% with no change in the participation rate. Combing through the finer details of the report, it's a challenge to find a significant concern.

The strong report underlines the better tone in US data that we have emphasized and the US dollar caught a broad bid. USD/JPY jumped to 102.20 from 101.90 and EUR/USD fell a half cent to 1.3600. From there the ECB meeting sent out some ripples (but no waves) and the market moved sideways with US traders sneaking out early for the long weekend.

Similar sized moves hit USD/CAD and cable but there it was a different story. From 1.7103 cable stormed back to 1.7155. USD/CAD rose to 1.0680 but sharply turned around and fell to a six-month low of 1.0621.

It's painful to buy the pound or loonie after the long runs they've been on. Indicators are overbought and the feeling of having missed out is prevalent. But if those pairs were going to retrace, Thursday's data would have been a prime opportunity.

The next focus shifts to the holiday trade. Asian and European markets are open as usual but many trading desks will take advantage of the US holiday on a summer Friday to take a break. The calendar is light through European trading with only May German factory orders at 0600 GMT on the schedule.

Watch out for whippy, flow-driven moves. If they're not connected to news, they rarely last.