- USD/CAD struggles for a firm near-term direction and oscillates in a range on Friday.
- Fed rate cut bets keep the US bond yields and the USD depressed, capping the pair.
- Rebounding Oil prices underpin the Loonie and also act as headwind for the major.
- Traders further seem reluctant ahead of the crucial US/Canadian monthly jobs report.
The USD/CAD pair extends its sideways consolidative price move for the third straight day and remains confined in a narrow trading band around the 1.4300 mark through the first half of the European session on Friday. Spot prices, however, manage to hold above the 1.4260 area, or the year-to-date (YTD) low retested on Wednesday, as traders await monthly employment details from the US and Canada before placing fresh directional bets.
The popularly known US Nonfarm Payrolls (NFP) report will influence market expectations about the Federal Reserve's (Fed) interest rate outlook and play a key role in driving the US Dollar (USD) demand. This is likely to overshadow Canadian jobs data and provide some meaningful impetus to the USD/CAD pair. In the meantime, bets that the Fed will stick to its easing bias keep the USD bulls on the defensive and act as a headwind for spot prices.
In fact, the markets are pricing in the possibility that the US central bank would lower borrowing costs twice by the end of this year. This keeps the US Treasury bond yields depressed near their lowest level since December and weighs on the USD. Apart from this, a goodish recovery in Crude Oil prices from over a one-month low underpins the commodity-linked Loonie and further contributes to capping the upside for the USD/CAD pair.
Meanwhile, investors now seem to have digested US President Donald Trump's recent decision to delay 25% trade tariffs against Canada and Mexico. Apart from this, the Bank of Canada's (BoC) dovish outlook might hold back traders from placing bullish bets around the Canadian Dollar (CAD). This warrants caution before positioning for an extension of the USD/CAD pair's sharp pullback from over a two-decade high touched earlier this week.
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
Read more.Next release: Fri Feb 07, 2025 13:30
Frequency: Monthly
Consensus: 170K
Previous: 256K
Source: US Bureau of Labor Statistics
America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.
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