USD/CAD: Canadian Dollar Slips After Strong U.S. Job Numbers

The Canadian dollar is steady in the Monday session, after considerable losses on Friday. Currently, the pair is trading at 1.2435, up 0.06% on the day. On the release front, there are no Canadian releases on the schedule. In the U.S., the sole event on the calendar is ISM Non-Manufacturing PMI. The indicator is expected to rise to 56.5 points. On Tuesday, Canada releases the trade balance and Ivey PMI. The U.S. will publish JOLTS Jobs Openings.

There was a changing of the guard at the Federal Reserve on the weekend, as Jerome Powell took over as chair, replacing Janet Yellen. On Friday, Yellen waxed optimistic about the economy, saying that strong growth, a red-hot labor market and increased wage growth would require the Fed to gradually raise interest rates. Powell is expected to continue to Yellen’s policies, so the markets are not expecting any dramatic shifts. However, the massive U.S. tax cut will have a strong impact on the U.S. economy, and the markets will be looking to the Fed for guidance. If the Fed sounds optimistic about the tax reform package, the U.S. dollar could move higher.

Strong U.S. employment numbers on Friday spelled bad news for the Canadian dollar, as USD/CAD jumped 1.3%. In the U.S., nonfarm payrolls jumped to 200,000, beating the estimate of 181,000. Wage growth remained steady at 0.3%, edging above the estimate of 0.2%. Will the strong numbers lead to additional interest rate hikes? Minneapolis Fed President Neel Kaskkari said on Friday that the Fed might need to be more aggressive if wages continued to move higher. The Fed is planning to raise rates three times in 2018, but some economists are forecasting four hikes.

USD/CAD Fundamentals

Monday (Feb. 5)

• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.5
• Tentative – US Loan Officer Survey

Tuesday (Feb. 6)

• 8:30 Canadian Trade Balance. Estimate -2.38B
• 10:00 Canadian Ivey PMI
• 10:00 US JOLTS Jobs Openings. Estimate 5.95M

*All release times are GMT

*Key events are in bold

USD/CAD for Monday, Feb. 5, 2018

USD/CAD for Feb. 4-6, 2018.

USD/CAD, Feb. 5 at 8:25 EDT

Open: 1.2427 High: 1.2451 Low: 1.2398 Close: 1.2435

USD/CAD Technical

USD/CAD posted limited movement in the Asian session and and has ticked higher in European trade

• 1.2351 is providing support
• 1.2494 is the next resistance line
• Current range: 1.2351 to 1.2494

Further levels in both directions:

• Below: 1.2351, 1.2190, 1.2060 and 1.1903
• Above: 1.2494, 1.2630 and 1.2757

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged in the Monday session. Currently, long positions have a majority (58%), indicative of trader bias towards USD/CAD continuing to move to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.