By Ketki Saxena
Investing.com – The Canadian dollar weakened against its US counterpart today, largely due to investors consolidating positions ahead of tomorrow’s pivotal U.S. non farm payrolls data, which comes on a stock market holiday (and will likely lead to some volatility on Monday when markets reopen)
Tomorrow’s data will be a major indicator for Federal Reserve bets, with weak economic data so far this week including the ADP (NASDAQ:ADP) report and jobless claims showed a slowing economy, and adding to expectations that the Federal Reserve will be forced to pause rate hikes, hot on the heels of a crisis in US regional banks.
The Canadian dollar meanwhile gained some support from crude prices, but little impetus from uncertain risk sentiment or a robust employment report as the Canadian labour market remained at a historical high for the fourth month straight.
The dollar slipped against some major currencies in thin trading Thursday, as investors consolidated positions and pondered how pivotal U.S. jobs data coming out on a stock trading holiday might impact Federal Reserve policy and unleash a potentially volatile market reaction.
Analysts at TD (TSX:TD) note, “The CAD was little changed following the number though this may be a function of the simultaneous release of US claims data, long weekend liquidity issues and US payrolls tomorrow.”
“The moderation in the wage numbers may be slightly encouraging for the BOC, though the robustness of job growth offers some offset.”
All eyes now remain on NFP tomorrow.
“The aggressive dovish repricing in the fed funds curve and our expectation for a solid NFP print sets up the risk of a push higher in USD/CAD. Should NFP surprise below consensus, however, 1.3380/00 will be important support.”
On a technical level for the pair, analysts at FX Street note, “Buyers kept sellers from testing the 200-day Exponential Moving Average (EMA) at 1.3374 and are hopeful of reclaiming the 100-day EMA at 1.3515.
“Even though the USD/CAD is printing a leg-up, the USD/CAD advancement could be capped by the 20 and 50-day EMA confluence at around 1.3568/75. If that scenario plays out, the USD/CAD might resume its current downtrend and test the 200-day EMA soon.
“On the flip side, for a bullish continuation, the USD/CAD must surpass the 1.3575 area on its way to 1.3600. Once cleared, the USD/CAD upside risks lie at 1.3705, the December 16 cycle”