Global market sentiment turned cautious heading into Friday, May 2, 2025, as traders digested a mix of weakening U.S. economic data and notable political developments. In the U.S., growth concerns came to the forefront after Q1 GDP unexpectedly contracted by 0.3% (annualized) – the first decline in three years – versus forecasts for +0.3% growth. This stark reversal from Q4’s +2.4% pace was driven in part by a surge in imports (+41%) as companies rushed to beat the implementation of President Trump’s tariffs. Inflation signals were mixed: The Core PCE Price Index for Q1 jumped to an annualized 3.5% (above expectations of ~3.1%), yet March’s year-over-year core PCE cooled to 2.6% (from 3.0% prior), reflecting some moderation in price pressures. The combination of slowing growth and still-elevated inflation has stirred stagflation worries, putting the Federal Reserve in a tricky spot ahead of its next policy meetings.
U.S. labor market data this week added to evidence of a cooling economy. The ADP private employment report showed companies added just 62,000 jobs in April, a sharp miss against the ~115,000 expected and a steep fall from March’s 147,000 gain. Likewise, the Labor Department’s JOLTS survey revealed job openings at a six-month low, with roughly 1.02 openings per unemployed person (down from 1.06) – a sign that demand for workers is softening. Weekly jobless claims ticked higher, as Initial Claims rose to 241K (vs 224K expected) and Continuing Claims climbed to 1.916M (vs 1.86M). All eyes were on Friday’s Nonfarm Payrolls, which confirmed the slowdown – employers added only ~130K jobs in April, a major pullback from the 228K added in March. The unemployment rate held at 4.2%, as forecast, and average hourly earnings grew 0.3% m/m (3.9% y/y), in line with expectations and indicating wage growth is steady. The much weaker job growth number underscores how momentum has faded; notably, economists warn that Trump’s trade tariffs could exacerbate this trend by forcing companies to cut jobs down the line. Indeed, uncertainty around trade policy has already led many businesses to delay investments and hiring, weakening the labor market’s earlier resilience.
On the political front, President Trump’s mid-week speech was closely watched by markets. In his address, Trump defended his “America First” economic agenda – highlighting upcoming tax cut proposals and doubling down on his tariff strategy – while also jawboning the Fed by suggesting that some easing might be warranted given signs of economic strain. His rhetoric reinforced both fiscal stimulus hopes and trade war fears, leaving investors torn between optimism and caution. Notably, uncertainty over tariff policy is cited as a key reason businesses are hesitant, and Trump’s hardline stance in the speech did little to assuage those concerns. Outside the U.S., political risk events were also in play. In the UK, a General Election on Thursday (Apr 30) injected some volatility into European markets. Early results pointed to a potential change in government, though the impact on broader risk sentiment has been limited so far (mostly affecting GBP). Still, the event underscored the global political flux that investors are navigating in 2025. Meanwhile, Canadian federal elections earlier in the week resulted in no major policy shock, and focus quickly returned to economic drivers for the Canadian dollar. Overall, the backdrop as we enter Friday is one of cautious risk-off mood – evidenced by volatile equities and a bid in safe-haven assets – yet the prospect of a Fed pivot (on mounting weak data) has started to cap the dollar’s strength. This tug-of-war has translated into choppy price action for major forex pairs.
EUR/USD
EUR/USD, M5 chart (Apr 30–May 1, 2025). The pair fell sharply amid U.S. data releases, breaking below 1.1300 support before finding footing near 1.1270.
Technicals in Focus
The euro struggled against the dollar this week, with EUR/USD extending its slide and printing lower highs and lower lows on the short-term charts. As the above 5-minute chart shows, the pair fell from the mid-1.13s on April 30 to a low around $1.1270 by May 1. Notably, the 1.1300 level, which had provided support earlier, was decisively breached amid the U.S. GDP and ADP releases. Bearish momentum was evident as intraday rallies were sold, and by Thursday the pair was hovering near its weekly lows. The immediate support zone is 1.1265–1.1275, roughly the bottom achieved in the past two sessions. A clear break below this could open downside toward 1.1200, a level not seen since early April. On the upside, minor resistance lies around 1.1340 (a congestion area from Apr 29–30), with stronger resistance near 1.1380–1.1400 (prior highs). Momentum indicators (on higher timeframes) suggest the euro is approaching oversold territory, and the recent narrowing of price swings hints at consolidation taking hold as traders await the next catalyst. If U.S. yields continue to retreat on soft data, the aggressive USD buying may abate, giving EUR/USD a chance to stabilize above the mid-1.12s.
Trading Strategy
Neutral-to-bullish bias in the near term – we are cautious given the recent downtrend, but the dollar’s upside may be limited if U.S. data disappoints further. A suggested strategy is to buy dips toward the $1.1270 support area, anticipating a relief bounce. An entry around 1.1280 can be considered, with an initial target at 1.1345 (near this week’s broken support turned resistance). A tight stop-loss at 1.1240 would protect against a deeper euro breakdown. This setup leans on the idea that Friday’s U.S. session (with the NFP miss) could spur a short-covering rebound in EUR/USD. Alternatively, if bullish momentum gains traction, a further push toward 1.1400 is possible, especially if Eurozone data (like inflation at 2.1% YoY) keeps the ECB on a hawkish footing. That said, if the 1.1270 floor cracks, bullish trades should be abandoned, as the pair could accelerate downward. Overall, we prefer a buy-on-weakness approach for EUR/USD going into the weekend, given the pair’s deeply oversold short-term conditions and the assumption that Fed tightening bets will ease after the raft of poor U.S. numbers.
USD/JPY
USD/JPY, M5 chart (Apr 30–May 1, 2025). The dollar spiked against yen after the BoJ meeting, reaching highs above ¥145.50 before steadying.
Technicals in Focus
USD/JPY spiked to its highest levels in over a month, driven by a potent mix of central bank divergence and safe-haven flows out of the yen. The pair’s short-term chart shows a steep rise from the ¥143 area into ¥145.50 by May 1. This surge followed the Bank of Japan’s policy decision late Wednesday: the BoJ left its interest rate at 0.50% (as expected) and gave little indication of tightening, which sparked a yen selloff. Technically, the break above ¥144.50 (prior resistance) triggered fresh bullish momentum, and USD/JPY briefly tested the ¥145.50-¥146.00 zone, which is near the top of its recent range. This area also coincides with levels that in previous years have drawn warnings from Japanese officials concerned about yen weakness. The uptrend remains intact for now, with rising moving averages on intraday charts and support levels stepping up. Initial support is seen around ¥144.50 (the breakout level), followed by ¥143.50 and ¥142.80. The latter was roughly the pre-BoJ low and a benchmark for the week. Despite the strong rally, there are hints that upside momentum is waning: bullish candles are getting smaller and an intraday double-top may be forming near ¥145.5. RSI readings on the 4H chart (not shown) also indicate near-overbought conditions. Fundamentally, the yen’s traditional role as a safe haven means it could strengthen quickly if risk sentiment sours further or if U.S. Treasury yields pull back on the weak U.S. data.
Trading Strategy
Neutral-to-bearish (cautious) on USD/JPY at these elevations. The pair’s rapid ascent has likely overshot in the short term, so we favor a strategy of selling into strength. A suggested trade is to sell USD/JPY on a push back up toward ¥145.5, with a stop-loss above ¥147.0 (to allow room above the recent highs and psychological ¥146-147 zone). The first take-profit target would be ¥144.00, around the technical support and a level the pair consolidated at on its way up. A secondary target could be ¥143.0, if a deeper retracement unfolds. This tactical short aligns with the view that U.S. yields may have peaked near-term – with 10-year yields pulling back, the dollar could lose steam against the yen. Additionally, any flare-up in risk aversion (e.g. equity selloff or geopolitical worry) would likely benefit the yen. Traders should be mindful that the policy divergence (Fed was tightening earlier vs BoJ’s ultra-easy stance) has been a key driver of yen weakness; thus, if next week brings more talk of Fed pauses or if Japan’s inflation surprises higher, the case for USD/JPY topping out grows. For now, we anticipate range trading between roughly ¥143–146, but lean toward selling the highs of that range. A clearly broken and sustained move above ¥146 would invalidate the bearish bias and could signal another leg higher (possibly toward ¥148), though that outcome seems less probable unless U.S. data suddenly reaccelerates or the BoJ intervenes verbally to weaken the yen further. Keep an eye on any remarks from Japanese officials – with USD/JPY at 145+, intervention rhetoric is a real possibility, which itself can cap the upside.
USD/CAD
USD/CAD, M5 chart (Apr 30–May 1, 2025). The pair was choppy but trended slightly higher, with a mid-week drop on oil news followed by a bounce toward 1.3850.
Technicals in Focus
USD/CAD saw two-way volatility this week, ultimately grinding higher as the Canadian dollar struggled to fully capitalize on positive domestic catalysts. The pair started around CAD$1.383 on April 30 and initially dipped to ~1.3780 (its weekly low) after a bullish oil inventory report mid-week. That dip marked a test of support near the prior week’s lows. Subsequently, USD/CAD rebounded and by late Thursday it spiked up to 1.3860, momentarily breaching the 1.3850 resistance region before stalling. On the chart above, this price action appears as a V-shape: a selloff into Apr 30 evening (likely on oil strength and broad USD wobble post-GDP), followed by a rally through May 1. Key support is evident around 1.3770–1.3780, which held firm on the latest pullback. A lower support can be noted at 1.3700 (a level from earlier in April). On the topside, resistance is now pegged at 1.3860–1.3880 – the zone where the pair peaked on May 1. Beyond that, the psychological 1.3900 level looms, and above it the year-to-date high near 1.3975. The short-term trend favors USD/CAD bulls (higher lows over the past few sessions), but momentum appears to be waning as the pair nears the upper end of its recent trading range. Notably, commodity price influences have been at play: the Canadian dollar got a boost when oil prices jumped on a big U.S. inventory draw, but that boost faded as crude oil gave back gains. (U.S. crude stocks fell by 2.696 million barrels last week, versus an expected +0.4 million build, yet oil failed to hold its rally amid demand concerns) This dynamic was reflected in USD/CAD – the pair’s drop on oil strength was short-lived. Canadian domestic data has been light, though we did see Canada’s February GDP shrink by 0.2%, and a preliminary March GDP +0.1% which suggests the economy is sluggish. This, combined with the U.S. dollar’s own swings, kept USD/CAD in a range-bound, indecisive mode overall.
Trading Strategy
Our stance for USD/CAD is neutral to slightly bearish on the USD (bullish CAD), especially after the pair’s rally into resistance. We see potential for a modest pullback in USD/CAD if risk sentiment stabilizes and oil prices find support. A possible trade setup is to sell USD/CAD around the 1.3840–1.3850 level (if retested intraday), aiming for a dip back toward 1.3760 as a target. A stop-loss can be placed at 1.3900, just above the recent high and key psychological figure. This risk-reward favors a return to the week’s midpoint range, on the premise that the U.S. dollar’s recent strength may fade post-NFP and that oil markets, while choppy, have underlying support (OPEC+ meets on May 5, which could curb supply or at least jawbone prices). Additionally, Canada’s currency could draw bids if investors anticipate the Bank of Canada will maintain a steady policy (or if any upbeat data from Canada emerges). It’s worth noting, however, that if global growth fears accelerate (for example, if equity markets tumble on the bad U.S. data), oil prices could slide again, which would hurt CAD and potentially send USD/CAD higher through 1.3900. Thus, a breakout above 1.3900 would flip the bias to bullish and could see the pair re-test 1.4000. For now, we favor the range scenario – selling near the top and buying near the bottom of the roughly 1.37–1.39 range that’s prevailed – with a slight preference to fade USD strength given the broader macro picture.
Market Outlook
Looking ahead to the next trading sessions and week, markets will grapple with the aftermath of this week’s data surprises and several upcoming economic releases. In the United States, the focus will shift to service-sector health and consumer activity: Monday brings the ISM Non-Manufacturing PMI for April, which will be scrutinized for confirmation of any slowdown in services. Also due early next week are March Factory Orders (Friday 10:00, which actually surprised at +4.2%, likely boosted by defense and aircraft orders) and the Trade Balance report – these will feed into Q2 GDP forecasts (the Atlanta Fed’s GDPNow for Q2 was marked down to 1.1% from 2.4% after this week’s data). Any further weakness could intensify market expectations that the Fed’s next move will be a rate cut rather than additional hikes. Fed officials will be on the speaking circuit as well; investors will parse comments from FOMC members in coming days to gauge if the Committee’s tone shifts dovish in light of the poor GDP and jobs figures. Notably, Fed Chair Jerome Powell is not scheduled for an immediate post-NFP speech, but regional Fed presidents like Williams and Daly are due to speak at events next week – their remarks on inflation vs. growth trade-offs will be pivotal. If Fed commentary suggests greater concern about growth (or hints at pausing hikes), the U.S. dollar could extend its pullback next week.
In Europe, attention will remain on inflation and central bank signaling. The ECB’s Economic Bulletin (released Friday) echoed that underlying price pressures persist, even as headline CPI in the Eurozone eased to 2.1% in April. With Eurozone core CPI still around 2.5% (above target), the ECB is likely to maintain a hawkish bias – we could hear more on this from ECB speakers or at the next policy meeting. This divergence (a slowing U.S. economy vs a still-inflationary Eurozone) could start to favor the euro in the coming weeks, especially if the Fed pauses while the ECB considers another hike. Data-wise, Eurozone retail sales and German industrial output figures are on deck for next week, which will give further clues on the health of the European economy in Q2. Across the English Channel, the UK election outcome will crystallize going into next week – a new government is expected to outline its fiscal and Brexit policies. While this is more directly a GBP factor, any significant shift (for instance, a looser fiscal stance by a new leadership) could indirectly influence global risk sentiment and thereby safe-haven flows. So far, the reaction has been muted, but bond markets will be watching how the UK’s political landscape settles.
On the commodity front, oil traders are awaiting the OPEC+ meeting on May 5. Oil’s recent slide below $60 despite bullish inventory draws highlights demand concerns stemming from the global slowdown and trade tensions. Should OPEC+ decide to cut or verbally signal support for prices, oil could rebound – aiding oil-linked currencies like the CAD. Conversely, if they stand pat and demand fears dominate, oil may stay subdued, removing a tailwind for the loonie. Other commodities (and commodity currencies like AUD/NZD) will likewise trade off China’s outlook and any news on U.S.-China trade discussions – an area to watch given Trump’s tariff maneuvers.
Market sentiment going into next week is likely to be a tug-of-war. On one hand, the significantly weaker U.S. data is sparking hopes that central banks might ease up – a dynamic that often supports risk assets (stocks, higher-yielding currencies) in the short run. On the other hand, the notion that the world’s largest economy is losing steam raises recession fears, which can quickly turn investors defensive. We expect FX traders to remain somewhat defensive until there is clarity: for instance, a few more data points confirming a trend, or guidance from the Fed on how they balance the mixed signals. Volatility could stay elevated as participants adjust positions – the VIX has been creeping higher, and currency vols may do the same, particularly in USD/JPY given the intervention risk above ¥145.
In summary, the baseline expectation for the coming sessions is for the USD to trade with a softer tone against majors like EUR (on Fed pause bets), while staying more range-bound against the JPY (as both serve as safe havens in risk-off waves). The CAD and other commodity currencies could see modest gains if global markets find comfort in a more dovish Fed and any stabilization in commodities. However, any fresh political surprises (be it from Washington or overseas) or shifts in central bank rhetoric could quickly alter this outlook. Traders should stay nimble and attentive to news wires – after a tumultuous week, the forex market is primed for potentially significant moves on the next piece of news. As always, prudent risk management is key in these uncertain conditions. The stage is set for an interesting start to May in FX, with the Euro trying to climb off the mat, the Yen eyeing a comeback, and the Canadian dollar riding the oil-price ebbs and flows. Prepare for another round of data and headlines as the market seeks direction in the wake of this week’s developments.