Talking Points:
- USD/CAD Rebound to Gather Pace on Dismal Canada Employment Report.
- USDOLLAR Extends Rebound as ISM Non-Manufacturing Beats Expectations.
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Chart - Created Using FXCM Marketscope 2.0
- USD/CAD may continue to retrace the decline from earlier this year amid the failed attempts to close below 1.2510 (78.6% retracement), while the Relative Strength Index (RSI) breaks out of the bearish formation carried over from January.
- Even though Canada Employment is anticipated to show another 2.0K expansion in April, an uptick in the jobless rate to an annualized 7.2% from 7.1% may dampen the appeal of the loonie especially if the Participation Rate holds steady at 65.9% for the fifth-consecutive month.
- Will keep a close eye on the topside targets as USD/CAD appears to have made a meaningful low, with the first hurdle coming in around 1.2930 (61.8% expansion) to 1.2980 (61.8% retracement), followed by 1.3130 (38.2% retracement).
- The DailyFX Speculative Sentiment Index (SSI) shows the FX crowd remains net-long USD/CAD since the first week of April, with the ratio hitting a near-term extreme coming into May as it edged above the +2.00 mark.
- The ratio continues to come off of recent extreme as it currently sits at +1.06, with long positions 34.5% lower from the previous week, while open interest stands 7.3% below the monthly average.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 11830.50 | 11833.84 | 11786.83 | 0.20 | 76.57% |
Chart - Created Using FXCM Marketscope 2.0
- Following the bullish-engulfing, the USDOLLAR may continue to track higher going into the highly anticipated U.S. Non-Farm Payrolls (NFP) report amid the recent series of higher highs & lows, while the RSI appears to be threatening the bearish formation carried over from the end of February.
- A positive development may heighten the appeal of the greenback as the U.S. economy is expected to add another 200K, while Average Hourly Earnings are projected to increase an annualized 2.4% following the 2.3% expansion in March; signs of stronger wage/job growth may boost bets for a Fed rate-hike at the next quarterly meeting in June.
- A break/close above 11,836 (61.8% retracement) to 11,843 (38.2% retracement) may spur a larger recovery in the USDOLLAR, with the next topside region of interest coming in around 11,898 (50% retracement), followed by 11,951 (38.2% expansion) to 11,965 (23.6% retracement).
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Read More:
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--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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