- USD/CAD found support ahead of Canadian employment data release.
- Positive US jobless claims data boosted sentiment and USD.
- Bank of Canada hopes for moderation in unemployment rate following 50 basis points of cuts.
USD/CAD seems to have found support ahead of crucial employment data set for release tomorrow.
The Canadian economy, particularly its job market, has struggled more than its counterparts, prompting the Bank of Canada (BoC) to lead in the rate cut cycle.
This week, the Canadian Dollar has benefited from a weaker US Dollar and a rebound in oil prices. Additionally, a surprisingly positive trade balance report, which comfortably beat estimates, has provided a further boost.
The Bank of Canada is facing more challenges than many of its peers. The economy’s performance has been lackluster, and with increasing discussions about a global recession, the Central Bank’s task becomes even more complex.
There was a positive today in terms of recessionary fears as US jobless claims came in better than expected. The number of unemployment benefit claims in the US dropped by 17,000 to 230,000 for the period ending August 3rd, falling short of market expectations of 240,000. Despite this decrease, the claim count remains significantly above this year’s average, suggesting that while the US labor market is still historically tight, it has softened from its post-pandemic peak.
Source: US Department of Labor
The data boosted sentiment, leading to a rise in US equities and an overall improvement in market outlook. The US Dollar index also gained traction and continues its upward trend following the selloff driven by recession fears on Friday and Monday.
Canadian Employment Data Ahead
Tomorrow will see the release of Canadian unemployment and employment change statistics. Since January, the unemployment rate has been declining, with a brief pause at 6.1% in March and April, before rising to 6.4% in June.
The Bank of Canada will be hoping for a moderation in the unemployment rate following the 50 basis points of cuts already implemented. A positive outcome might be what USD/CAD needs to break the key support level at 1.3736.
Technical Analysis
From a technical perspective, USD/CAD is positioned just above a critical support level at the 1.3736 mark. After failing to sustain levels above 1.3900, my earlier article this week mentioned the 1.3740-30 range as a potential area of interest for a retest.
Analyzing price action and today’s daily candle close could be pivotal. The positive jobs data print helped lift USD/CAD from its support, with the daily candle oscillating between a doji and a hammer pattern. Nevertheless, this could change by the end of the day.
Immediate support is at 1.3736, and a drop below this could lead to a retest of the 1.3690 area, which is also aligned with the 100-day moving average. On the upside, immediate resistance is at 1.3800, followed by levels at 1.3850 and 1.3900.
USD/CAD Chart, August 8, 2024
Source: TradingView (click to enlarge)
Support
- 1.3736
- 1.3690
- 1.3650
Resistance
- 1.3800
- 1.3855
- 1.3900
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