- USD/CAD edged higher in reaction to the upbeat US NFP report and mixed Canadian jobs report.
- An uptick in oil prices underpinned the loonie and continued acting as a headwind for the major.
- A sustained strength beyond the 1.3075-1.3080 barrier is needed to confirm a bullish breakout.
The USD/CAD pair caught fresh bids during the early North American session and shot to the daily high, around the 1.3035 region following the release of the US/Canadian jobs report.
The headline NFP showed that the US economy added 372K jobs in June as against an increase of 384K (revised down from 390K) reported in May. This, however, surpassed consensus estimates of 268K by a big margin. Adding to this, the Unemployment Rate held steady at 3.6% and reaffirmed expectations for a more aggressive policy tightening by the US central bank. The prospects for faster Fed rate hikes triggered a sharp spike in the US Treasury bond yields. Apart from this, a softer risk tone continued lending support to the safe-haven US dollar and pushed the USD/CAD pair higher.
In contrast, Statistics Canada reported a 43.2K decline in Net Change in Employment, which exerted some pressure on the domestic currency and provided an additional lift to spot prices. The disappointment, however, was offset by that the fact that the Unemployment Rate in Canada declined to 4.9% in June from 5.1% in the previous month. Adding to this, some follow-through uptick in crude oil prices underpinned the commodity-linked loonie and capped any meaningful upside for the USD/CAD pair. This, in turn, warrants some caution before placing aggressive bullish bets around the major.
Hence, it will be prudent to wait for strong follow-through buying and sustained strength beyond the 1.3075-1.3085 supply zone before positioning for any further gains. Nevertheless, the USD/CAD pair remains on track to end the week on a positive note and might continue to take cues from the US/oil price dynamics.
Technical levels to watch
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