USD/CAD Breaking News: Loonie Retreats on Canadian Labor Data

USD/CAD Analysis

• Unemployment higher for the first time in 7 months.
• Bearish IG client sentiment data.

BIG MISS ON CANADIAN EMPLOYMENT HAS MARKETS FAVORING USD

After the Bank of Canada (BoC) hiked interest rates by 75bps on Wednesday, CAD bulls built up a head of steam prior to today’s labor release. Markets overexuberance in the dollar sell-off may have been propelled by profit-taking or simply the overbought nature of the greenback of recent where traders looked for any anti-dollar sentiment to pounce on. Today’s data (see economic calendar below) has put a halt to this market enthusiasm as unemployment hit levels last seen in February 2022 while employment remained in negative territory despite estimates looking for a positive headline read.

Source: DailyFX Economic Calendar

Going forward, we cannot ignore global recessionary fears, demand destruction which will impact oil negatively, a strong U.S. economy and a hawkish Federal Reserve which should keep USD/CAD bulls interested.

USD/CAD DAILY CHART

Chart prepared by Warren Venketas, IG

Key resistance levels:

• 1.3100

Key support levels:

• 1.3027
• 1.2895

IG CLIENT SENTIMENT DATA: BEARISH

IGCS shows retail traders are currently prominently long on USD/CAD, with 54% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term downside bias.

Contact and follow Warren on Twitter: @WVenketas