The Canadian Dollar weakens for a second straight day as the US Dollar strengthens on the back of positive US employment data. This data lifted US Treasury yields, making the US Dollar more attractive to investors. However, strong economic data in Canada, measured by the Ivey PMI, is offering some support to the Loonie after recent disappointing labor figures.
The Canadian Dollar (CAD) staged a comeback on Friday, clawing back losses incurred earlier in the US session. This reversal came despite a seemingly strong US jobs report and disappointing Canadian employment figures.
While initial headlines trumpeted robust US nonfarm payroll growth in March, a closer inspection revealed a cooler picture. Yearly wage growth dipped to its lowest level in years, hinting at a potential slowdown. This tempered the initial bullish reaction on US Treasury yields and the US Dollar, keeping hopes of future Federal Reserve interest rate cuts alive despite hawkish comments from Governor Michelle Bowman.
Across the border, Canada’s own labor figures fell short of expectations, but a silver lining emerged in the form of the Ivey Purchasing Managers’ Index (PMI). This key economic indicator for Canada saw a significant improvement in March, providing some much-needed support for the Loonie.
Technical Overview of the USD/CAD Market
Early in the week (April 1st to April 3rd), the USD/CAD market faced resistance at the 1.35804 level. Failing to break above, the price experienced a downward breakout during the fourth 4-hour session on Wednesday. This decline continued until it found support at 1.34864.
From this support level, a bullish reversal emerged, driving the price to a new high of 1.36287. Viewed from a broader chart perspective, the recent price action demonstrates a series of higher lows, potentially signaling a bullish trend. Additionally, the current price sits near a new high, further supporting this view.
However, it’s important to note the presence of Bollinger Bands, an indicator suggesting current market volatility. This volatility translates to potentially dramatic price swings between established highs and lows in the near future.
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