**USD/CAD Bounces Back Following U.S. and Canadian Jobs Data**
*Adapted and expanded from an original article by EconoTimes*
The USD/CAD currency pair saw a notable recovery after both the United States and Canada released their latest employment reports. The numbers from both countries offered mixed signals to investors and traders looking for direction in the North American economic landscape. As a result, the Canadian dollar weakened while the greenback regained some footing, propelling the USD/CAD pair higher despite initial weakness.
This article expands on the original from EconoTimes, providing greater context, data, and analysis to help understand the USD/CAD movement in light of recent macroeconomic developments.
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**Key Drivers of the USD/CAD Rally**
The rebound in the USD/CAD currency pair can be attributed to the interplay of several factors stemming from the surprise elements in the U.S. and Canadian job numbers:
1. **U.S. Nonfarm Payrolls (NFP) Surprise**:
– The U.S. added 272,000 jobs in May 2024, greatly surpassing market expectations of around 185,000.
– Average hourly earnings rose 0.4% month-over-month and 4.1% year-over-year, suggesting that wage inflation remains sticky.
– The unemployment rate, surprisingly, ticked up to 4.0% from 3.9%, marking the first time it hit that level since January 2022.
– The stronger-than-expected payroll figures contrasted with the rising unemployment rate, generating mixed interpretations around labor market health.
2. **Canadian Jobs Data Disappoints**:
– Canada reported a loss of 17,000 jobs in May, contrary to the anticipated gain of 22,500 positions.
– The Canadian unemployment rate edged upward to 6.2%, the highest level in over a year.
– Full-time employment declined, while part-time positions saw a slight increase, raising concerns about job quality.
– Wage growth in Canada remained relatively subdued, with average hourly wages rising only 1.9% yearly.
3. **Central Bank Policy Divergence**:
– On June 5, 2024, the Bank of Canada (BoC) became the first G7 central bank to cut interest rates, lowering its overnight rate by 25 basis points to 4.75%.
– The BoC cited cooling inflation and weaker-than-expected economic growth as justifications for easing policy.
– Meanwhile, the U.S. Federal Reserve has maintained a cautiously hawkish stance, emphasizing the need for more evidence of cooling inflation before considering rate cuts.
– This divergence in policy direction between the BoC and the Fed has pushed capital flows in favor of U.S. assets, supporting the U.S. dollar.
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**USD/CAD Technical Outlook**
Following the U.S. and Canadian labor reports, the USD/CAD pair quickly reversed earlier losses and climbed toward the psychological resistance level of 1.38. Technical indicators reflect a bullish sentiment in the short to medium term.
– **Support Levels**:
– 1.3730 (100-day Exponential Moving Average)
– 1.3680 (200-day EMA)
– 1.3600 (trendline support)
– **Resistance Levels**:
– 1.3800 (psychological barrier)
– 1.3860 (23.6% Fibonacci retracement level from the March high)
– 1.3900 (a key resistance level from early 2023)
– **Momentum Indicators**:
– Relative Strength Index (RSI) is rising above the neutral 50-level, indicating increasing bullish momentum.
– MACD (Moving Average Convergence Divergence) shows a bullish crossover, further reinforcing the upside bias.
Given current market sentiment and policy divergence, upside chances appear favorable, although volatility remains elevated.
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**What Analysts Are Saying
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