Title: USD/CAD Technical Analysis: Loonie Wavers as Jobs Data Fuels Volatility, What’s Next?
By adapting an article originally written by Adam Button and published on ForexLive via TradingView, this comprehensive USD/CAD technical analysis will expand on the currency pair’s latest movements following the stronger-than-expected Canadian employment data and the resulting market reaction.
Overview: USD/CAD Seesaw After Jobs Surprise
The USD/CAD pair experienced notable turbulence following the release of stronger-than-expected Canadian employment figures. Initially, the Canadian dollar strengthened significantly, causing USD/CAD to plunge. However, this initial move was short-lived as the pair rebounded to regain much of its lost ground.
Canadian June employment data surprised markets by showing that the labor market remains resilient. This fueled speculation about the Bank of Canada’s future interest rate policy, as strong employment suggests it may not be in a rush to cut rates. That optimism sparked a rally in the Canadian dollar. However, the rebound in USD/CAD highlights lingering doubts about global economic trends, particularly in the United States.
Let’s break down what happened and analyze the technical indicators, key price levels, and what traders should watch for moving forward.
Stronger Canadian Jobs Report: Key Data Points
On July 5, Canada released its employment numbers for June, and the data beat expectations:
– Net change in employment: +60,000 jobs (vs. forecast of +25,000)
– Unemployment rate: 6.4% (up slightly from 6.2%)
– Full-time jobs: +0.1%
– Participation rate: 65.3%
The jobs data provided a temporary lift to the Canadian dollar. However, the increase in the unemployment rate, though marginal, tempered enthusiasm. Moreover, wage growth also remains stable, suggesting no immediate inflationary pressures from labor costs.
As a result, while markets reacted initially with CAD buying (sending USD/CAD lower), the details of the report didn’t strongly shift the policy outlook for the Bank of Canada (BoC). The central bank remains cautious as inflation approaches its 2% target, and current data alone doesn’t significantly change that trajectory.
Initial USD/CAD Reaction: Bearish Move
Immediately after the jobs release:
– USD/CAD fell from 1.3670 to a session low around 1.3610
– This represented a quick 60-pip drop, reflecting the knee-jerk bullish CAD reaction
– Selling pressure was primarily fueled by expectations of a more resilient Canadian economy
However, this rapid move lower found support near the 100-hour moving average (around 1.3610), prompting a bounce.
Key Technical Levels
From a technical standpoint, several price zones are crucial in determining USD/CAD’s next move:
1. Immediate Support: 1.3610
– This level coincides with the 100-hour moving average.
– The bounce from here matches historical technical behavior where dips toward the 1.3610 range attracted buyers.
2. Resistance Levels:
– 1.3670-1.3680: This is a near-term resistance zone where sellers previously emerged.
– 1.3700: Psychological round number and peak from earlier July trading sessions.
3. Trendlines and Moving Averages:
– The 100-hour moving average is a short-term support indicator.
– The 200-hour moving average near 1.3590 might offer additional support should price decline further.
– Daily trendline support lies between 1.3550 and 1.3580, marking a longer-term area of structural strength.
Technical Indicators: Mixed Signals
The RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) indicators are showing some divergence:
– RSI: Hovering between 50-55, suggesting a neutral trend with some bullish momentum gathering after the bounce.
– MACD: Slightly bullish crossover began forming
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