the NFP report once again exceeded expectations,
maintaining its impressive streak of positive results for 14 consecutive instances.
However, upon closer examination, the report unveiled less favourable findings.
The unemployment rate saw a significant jump from 3.4% to 3.7%, representing
the largest month-over-month increase since the pandemic began. Additionally,
there was a slight reduction in average workweek hours, a potential indicator
of impending layoffs by employers. Overall, the report presented a combination
of data that could be interpreted differently by different participants.
Shifting our attention to
the US ISM Services PMI, it reported a considerably lower
figure of 50.3, falling short of expectations and narrowly missing the threshold
for contractionary territory. The employment sub-index indicated contraction,
and the prices paid sub-index experienced a substantial decline, returning to
levels last observed in May 2020. Consequently, the market reacted by further
reducing the likelihood of the Federal Reserve implementing additional interest
rate hikes.
The recent surprising BoC rate hike boosted the CAD and the big miss in
US Jobless Claims yesterday weakened further the USD
as the market is getting increasingly comfortable with the idea that the Fed
may be nearing the end of the tightening cycle even if it leaves a door open
for another hike.
USDCAD Technical Analysis –
Daily Timeframe
On the daily chart, the USDCAD eventually broke
below the 1.34 support and
extended the selloff as the BoC delivered the rate hike. The price is now near
the 1.3300 handle, and we started to see some consolidation as the market is
looking forward to the next week’s CPI report and FOMC meeting. We
might see a bounce or just a rangebound price action until then, so it would be
better to just wait until those risk events are out of the way and we get a
clearer picture.
USDCAD Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see that USDCAD ranged
a bit at the 1.34 handle and then broke out as the sellers leant on the red 21 moving average and
pushed the price lower trading into the BoC meeting. We are now seeing some
weakening momentum falling right into the 1.33 handle as depicted by the divergence with the
MACD. That’s
generally a signal of an imminent pullback or reversal, so we may see some
profit taking at the 1.33 level, if the price gets there, as traders may want
to take out some risk before the next week’s events.
USDCAD Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see more
clearly the recent breakout of the box at the 1.34 handle. The USDCAD hasn’t done
much since the BoC rate hike and the big miss in US Jobless Claims. This should
be a clear sign that the market is awaiting the CPI and the FOMC before getting
the conviction for the next direction. The levels to watch are of course the
1.33 support and the 1.34 resistance. A break to the upside, may take us to the
1.3553 resistance again, while a break to the downside should result in a test
of the key 1.3225 level first and possibly a breakout afterwards.
This article was written by ForexLive at www.forexlive.com.