USD/CAD climbs to 1.3400 on broad USD strength
|- USD/CAD is rising for second straight day on Friday.
- US Dollar Index posts decisive gains after US NFP report.
- Upbeat data releases from Canada help CAD limit its losses.
The USD/CAD pair dropped toward 1.3320 in the early American session on Friday but reversed its course and climbed to 1.3400 area. As of writing, the pair was up 0.6% on a daily basis at 1.3384.
Earlier in the day, the initial reaction to the US and Canada labour market data caused USD/CAD to edge lower. Statistics Canada announced an increase of 418,500 in the Net Change in Employment and revealed that the Unemployment Rate dropped from 12.3% in June to 10.9% in July.
On the other hand, the US Bureau of Labor Statistics reported that Nonfarm Payrolls increased by 1,763,000 in July, compared to analysts' estimate of 1,600,000.
Nevertheless, with the heightened US-China geopolitical tensions and lack of progress in US coronavirus aid talks keeping markets risk-averse, the greenback gathered strength and caused USD/CAD to turn north. At the moment, the US Dollar Index is up 0.7% on the day at 93.41.
Meanwhile, Ivey Purchasing Managers Index in Canada rose sharply to 68.5 in July and beat the market expectation of 57.5, helping the CAD limit its losses for the time being.
USD/CAD near-term outlook
Commenting on the potential impact of Friday's data releases, "a better jobs print in both the US and Canada has the CAD back to trading on its front foot," said TD Securities analysts. "We think markets were closing USD shorts ahead of today out of caution that the US data had some downside potential. With that risk not materializing, we think the USD bid now looks tenuous and leaves USD/CAD inclined to trade back below the 1.3350/60 pivot. We expect supports located around 1.3230 to be formidable in the meantime.”
Additional technical levels to watch for
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