Technical Analysis

Markets Eye Canadian Job Report, U.S. Inflation

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    The Canadian dollar has extended its losses today. is trading at 1.2743, up 0.35% on the day.

    Thursday saw the gives its Canadian cousin a spanking, as USD/CAD jumped 1.13%, its highest daily gain this year. A rise in US Treasury yields helped boost the US dollar, as the yield remains above 3%. As well, US disappointed, rising to 229,000. This was higher than the previous release of 202,000 and above the estimate of 210,000. The rise in claims was not massive, but nonetheless has fed into the market’s nervousness over the US economy, and the result was a drop in risk appetite which sent the Canadian dollar tumbling lower.

    It could be a busy end to the trading week, with Canada’s report and US inflation on today’s schedule. Canada’s job numbers for May are expected to be solid – the economy is projected to have created 30.0 thousand new jobs, up from 15.3 thousand in April. The unemployment rate is forecast to remain unchanged at 5.2%.

    All eyes on US inflation

    The highlight of the week will be US inflation for May. Headline inflation is expected at 8.3% (unchanged), while is forecast to fall to 5.9%, down from 6.2%. If inflation does indeed drop, there will likely be voices proclaiming that the long-sought inflation peak is finally here. It would, however, be premature to assume that inflation is on a downswing based on one reading alone. Still, there is plenty of anticipation around the inflation release, such that it could be a binary outcome for USD/CAD – if inflation outperforms, Fed hiking expectations will rise. If, however, inflation drops, we could see a move to sell US dollars.

    USD/CAD Daily Chart

    USD/CAD Technical

    USD/CAD is testing resistance at 1.2703. Above, there is resistance at 1.2812
    There is support at 1.2628 and 1.2519

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