By Ketki Sxena
Investing.com --The Canadian Dollar gained against its US counterpart today, bouncing back from a four-week trough as domestic employment data exceeded expectations while US nonfarm payrolls missed expectations.
In June, Canada's economy welcomed 59,900 new jobs - the most significant increase since January and well above median predictions of a 20,000 job gain. Despite the unemployment rate rising to 5.4% from 5.2%, due to more people entering the job market in search of work, the data was generally seen as positive and has been beneficial for CAD.
"The June jobs report effectively dispels last month's speculation about a severe cooling trend in Canada's labor market," remarked Jay Zhao-Murray, Market Analyst at Monex Canada Inc.
He further added: "Financial markets are increasingly aligning with our perspective that another interest rate hike is imminent from the Bank of Canada next Wednesday."
Prior to these figures being released, there was roughly a 60% probability predicted by money markets that BoC would increase its benchmark interest rate by 25 basis points during next Wednesday’s policy decision; this likelihood has now risen to approximately 62%.
CAD also received a boost from rising oil prices, following EIA data indicating heightened demand due to increased summer travel in the US.
Meanwhile, the US dollar weakened across the board as US Nonfarm Payrolls data showed that only 209K vacancies were filled in June compared with an expected figure of around 225 K . The Unemployment Rate remained steady and came in in-line with expectations at 3.6%.
This less substantial rise in US employment could lead towards reduced inflationary pressure along with the need for less aggressive monetary policy adopted by US Federal Reserve.
On a technical level for the pair however, analysts at FX Street note that the "USD/CAD trend is now bullish both on shorter and longer time frames after decisive breach of key 1.3270 lower highs. "
"However price was rejected at the 1.3400 crossroads where the 50-day Simple Moving Average (SMA) is currently located. "
Looking ahead for the pair, they note that "It will take a decisive break above the 50-day SMA to keep the uptrend momentum going. If the pullback currently underway closes below the 1.3270 key level, it will bring the short-term uptrend into doubt and potentially signal more downside to come."