USD/CAD Price Probes Key Trade Level Ahead of Monthly Jobs Report
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USD/CAD PLUNGES TO 1.4000 PRICE LEVEL AS CANADIAN DOLLAR CLIMBS; MONTHLY JOBS DATA EYED FOR FOLLOW-THROUGH
- USD/CAD dropped about 200-pips from its intraday high recorded during the prior trading session
- Spot USD/CAD price action gravitates back around the 1.4000 handle owing to the recent stretch of Canadian Dollar strength
- US Dollar downside follows implied Fed funds rate flipping negative for the first time ever ahead of monthly jobs data due for release
The Canadian Dollar is on pace to be one of the top performing major currencies relative to the USD on Thursday. Weakness in spot USD/CAD price action is accompanied by another staggering rise in weekly jobless claims data out of the United States.
As job losses snowball, and the likely unavoidable coronavirus recession grows deeper, it might encourage the FOMC to double down on its accommodative efforts. US Dollar headwinds have corresponded with bond traders attempting to front-run more dovish action from the Federal Reserve.
In fact, the effective Fed funds rate just dipped into negative territory and the 2-year US Treasury yield hit a new record low. This helped steer USD/CAD prices to fresh month-to-date lows near the 1.4000 level – a massive area of technical confluence and potential pivot point with widely-anticipated jobs data on deck for release early Friday.
US-CANADA EMPLOYMENT DATA SET TO DRIVE SPOT USD/CAD PRICE ACTION
Monthly US nonfarm payrolls and Canadian employment data, expected May 08 at 12:30 GMT, could have a material impact on spot USD/CAD price action, and might cause currency volatility to accelerate.
Nevertheless, if market participants have a mixed reaction to the upcoming jobs data, there is a possibility that USD/CAD stays relatively anchored to its 50-day moving average and 38.2% Fibonacci retracement of the year-to-date range.
USD/CAD PRICE CHART: DAILY TIME FRAME (20 DECEMBER 2019 TO 07 MAY 2020)
Beyond the current 1.4000 price level, technical support could be found near the April lows before USD/CAD bears set their sights on the 1.3800 handle. On the other hand, a return of US Dollar strength could find opposition from the downward-sloping trendline of resistance that extends through the recent series of lower highs since mid-March.
The 23.6% Fibonacci retracement level, slightly above the 1.4200 price, could serve as another potential upside target for USD/CAD bulls if jobs data on deck prompts the return of risk aversion and US Dollar dominance.
-- Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.