USD/CAD rebounds off key 1.3000 support ahead of Canada jobs data
James Chen, CMT February 6, 2017 8:37 PM
- USD/CAD rebounded off key 1.3000 psychological support on Monday as recent US dollar weakness began to stabilize and sharply falling crude oil prices pressured the Canadian dollar.
- Recent bullish conditions affecting Canadian dollar: Canada’s Gross Domestic Product (GDP) for November 2016 better-than-expected at +0.4% against forecast of +0.3%; crude oil prices generally well-supported on strength of December’s output cut deal among major OPEC/non-OPEC oil producers.
- Recent bearish conditions affecting Canadian dollar: Bank of Canada has stated that an interest rate cut is still “on the table,” partly due to Trump’s protectionist stance and expected renegotiation or dissolution of the North American Free Trade Agreement (NAFTA).
- Upcoming conditions affecting Canadian dollar: Canada’s employment change and unemployment rate for January to be released on Friday.
- US dollar direction: USD has been significantly bearish since the beginning of the year on heightened uncertainty over US President Trump’s fiscal and trade policies and the Federal Reserve’s monetary policy. Last Friday’s US jobs report showed that January added many more jobs than previously expected, but wage growth (a key inflation indicator) lagged well behind expectations, dampening Fed rate hike anticipation.
- The current short-term trend for USD/CAD is bearish amid a pressured US dollar and a supported Canadian dollar boosted by climbing oil prices and positive Canadian economic data. The longer-term trend, though, remains bullish.
- Despite a short-term bearish trend, the 1.3000 level continues to be a major support barrier.
- Any sustained rebound off 1.3000 support has an upside target around 1.3400 resistance.
- Any breakdown and daily close below 1.3000 could extend the short-term downtrend, with the next major downside target at 1.2800 support.
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