USD/CAD in focus ahead of Canadian jobs data


The USD/CAD is the currency pair to watch as we transition to the North American session with high-impct Canadain jobs data likely to determine the short-term direction for this pair... 



So far it has been a quiet-ish day for data, with the exception of industrial production data for France and Italy, both beating expectations by a mile earlier. Up next is the Canadian jobs data at 13:30 London time.

Earlier, the USD/CAD moved higher as the CAD fell alongside oil and gas prices as rising coronavirus rates fuelled worries about demand.  Deaths from COVID-19 have hit a daily high in Texas and Florida, while Hong Kong announced it will close schools again to help contain the spread of the virus. It remains to be seen what the USD/CAD will do later on in response to the upcoming jobs report from Canada.

Some 3 million Canadian jobs were lost during the height of the pandemic, but analysts are expecting a good 700 thousand rebound in June employment after an unexpected 290 thousand increase the month before. If the Canadian jobs data turns out to be better than expected, then the CAD should rally while a very poor number could undermine the commodity dollar, especially with oil prices also being lower today despite an optimistic forecast by the International Energy Agency, which envisages demand will rebound sharply over the coming months while crude stockpiles will diminish on the back of OPEC+ production cuts.  
 
Meanwhile from a technical point of view, the USD/CAD has arrived at a key technical juncture. Earlier, the Loonie moved higher to presumably clear liquidity above the short-term double top high at 1.3625, before going back below it as you can see on hourly chart, below:

USD/CAD Hourly
Source: TradingView.com and ThinkMarkets

If rates hold below this 1.3635 level, it would be bearish for it would indicate the bulls are trapped above the old double top high.

On the daily, you can see that the USD/CAD is testing bearish trend line, possibly creating a false break above it, which would be very bearish if confirmed by a daily close below it:

USD/CAD Daily
Source: TradingView.com and ThinkMarkets

Therefore, a close below the trend line is what I am looking for today, to signal a resumption of the downward trend. However, a daily close above the trend line would invalidate the bearish bias. A lot therefore depends on the outcome of today’s Canadian jobs report and obviously risk sentiment across the wider markets.
 
  • If rates break below today’s earlier low, then we could see a sharp drop to 1.3500 next, with the liquidity below the double bottom around 200-day MA at 1.3488 being the next objective for the bears
  • However, if we close above the trend line today then there could well be some bullish follow-through in early next week
So, in summary, I am thinking that if we go back below today's low, the buyers will get into real trouble given what looks like a false break above the trend line on the daily and the double top on the hourly time frames.



Back