USD/CAD analysis ahead of the US NFP and Canada jobs report

July 06, 2023 11:17 PM PDT | By Invezz

USD/CAD analysis ahead of the US NFP and Canada jobs report — Image source: Invezz

US bond yields soar

The biggest USD news was the strong jobs report by ADP. The report showed that the private sector created over 459k jobs in June. As a result, investors moved to the safety of the US dollar as they predicted more Fed hikes.

Investors also dumped US government bonds, pushing the yield of the 2-year bonds to the highest level in more than 16 years. Shorter and longer term bond yields also surged while the inversion fell to the lowest level in a decade. US stocks plunged, with the Dow Jones erasing 500 points.

Other recent American data have been strong, signaling that the recent rate hikes are not slowing the economy fast enough. On Thursday, data revealed that the initial jobless claims dropped while the ISM non-manufacturing PMI held steady above 50.

US consumer confidence jumped in June while the housing sector has remained quite strong in the past few months.

The next key forex news will be the upcoming US non-farm payrolls (NFP) data. Economists believe that the economy added over 225k jobs in June while the unemployment rate dropped to 3.6% during the month.

The other news to watch will be Canada’s jobs report. Economists polled by Reuters expect the data to show that the unemployment rate rose slightly to 5.3% as the economy added 20k jobs in June.

The implication of such a report is that the Bank of Canada (BoC) will continue pausing when it meets on July 12th of this year.

USD/CAD forecast

USD/CAD chart by TradingView

The USD/CAD exchange rate has been in a strong bullish comeback in the past few days. In this period, it has managed to flip the important resistance level at 1.3302 into a support. This price was the lowest point in April.

The pair has formed an inverted head and shoulders pattern and moved above the 50-period moving average. At the same time, the Relative Strength Index (RSI) moved to the overbought level of 80.

Therefore, I suspect that the pair will retreat and retest the important support at 1.3300. It will then resume the bullish trend if this happens.

The post USD/CAD analysis ahead of the US NFP and Canada jobs report appeared first on Invezz.

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