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Canadian Dollar Outlook: USD/CAD Levels to Watch Ahead of Jobs, NFP Data

Canadian Dollar Outlook: USD/CAD Levels to Watch Ahead of Jobs, NFP Data

Daniel Dubrovsky, Strategist

Canadian Dollar, USD/CAD, CAD Index, Jobs Report, Treasury Yields – Analyst Pick

  • Canadian Dollar eyeing local and neighboring jobs report
  • USD/CAD remains glued to range-bound price action
  • What are levels to watch for broader trend developments?

The Canadian Dollar has been struggling to find further momentum against the anti-risk US Dollar as of late. A closer look reveals that despite recent consolidation, the broader uptrend in CAD remains intact. This is ahead of key data this week that may drive volatility in both the Loonie and Greenback. Jobs data are due from the US and Canada, offering further clues about the pace of economic recovery from Covid-19.

On the chart below is a majors-based Canadian Dollar index, averaging its performance against the US Dollar, Japanese Yen, British Pound and Euro. Recently, prices bounced from long-term rising support from late March 2020. That has reinstated the focus to the upside and could hint at near-term strength to come in CAD against some of its fiat counterparts.

On Friday, Canada’s unemployment rate is expected to tick slightly higher from 8.8% to 8.9% in January as the nation losses 42.9k employed positions. Meanwhile in the US, the unemployment rate is anticipated to hold at 6.7% for the same month while adding 100k non-farm payrolls. Recent ADP data may paint a better-than-expected outcome, perhaps opening the door to adding further gains to longer-dated Treasury yields.

This may place the Loonie at risk to the Greenback if employment gains in the US are relatively stronger. Having said that, the impact on market sentiment down the road may also be important to watch. Rising equities may benefit the growth-linked CAD at the expense of USD. So with that in mind, let’s take a look at the technicals to see how longer-term trends may unfold in the coming days and weeks.

Majors-Based Canadian Dollar Index

Canadian Dollar Outlook: USD/CAD Levels to Watch Ahead of Jobs, NFP Data

Chart Created in TradingView

Canadian Dollar Technical Analysis

USD/CAD appears to be consolidating between support (1.2590) and resistance (1.2957). Simultaneously, a falling range of resistance from late March 2020 seems to be maintaining the focus to the downside. The pair is pressuring the latter, but a push above the trendline would still leave the 1.2906 – 1.2957 resistance zone to clear thereafter. Around the same area sits the 100-day Simple Moving Average (SMA).

Clearing these technical boundaries may precede a key turning point in USD/CAD that exposes the 1.3102 inflection point, followed by resistance at 1.3320 – 1.3421. Resuming the dominant downtrend on the other hand entails clearing the 1.2590 – 1.2630 support zone. That would subsequently expose the April 2018 low as the pair aims for the bottom achieved in the same year at 1.2250.

With that in mind, these are some of the key technical boundaries to watch for as key jobs data crosses the wires from the United States and Canada with USD/CAD focusing on range-bound price action.

Check out the DailyFX Economic Calendar for updates on these figures

USD/CAD – Daily Chart

Canadian Dollar Outlook: USD/CAD Levels to Watch Ahead of Jobs, NFP Data

Chart Created in TradingView

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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