USD/CAD had formed a top around 1.32 and after the second failure to hold above that level, this pair reversed again yesterday. The USD started to pull back after being bullish for a while, while the Bank of Cabana raised interest rates by 0.75% after rising 1.00% in the last meeting. Although more than the rate hike, the CAD benefited from comments from the Bank of Canada that they would continue with rate hikes for the foreseeable future.
The bullish reversal in Crude Oil also helped the CAD such that the sellers pushed this pair below the double top neckline which stood at 1.3070 and below 1.30 as well. The target for the double top decline was 1.2940, which this air hit yesterday.
USD/CAD H4 Chart – Previous resistance held as support
The 50 SMA also helped sustain the price during the decline
Previous support at this level held downside helped by the 50 SMA (yellow) and we saw a retracement higher above 1.30 where price closed before the end of the week. August’s Canadian jobs report was negative and the unemployment rate soared. This means that the Bank of Canada may not be able to maintain the pace of rate hikes, which is bad news for the CAD. So, we could see USD/CAD heading back towards 1.32, that coming low.
Canadian employment data for August 2022
- August employment -39.7K vs +15.0K expected
- Employment in July was -30.6K
- Unemployment rate +5.4% vs +5.0% expected (before 4.9%)
- Full time -77.2K vs -13.1K before
- Part time +37.5K vs -17.5K before
- Participation rate 64.8% vs 64.7% before
- Average hourly wage 5.6% year-on-year vs. 5.4% previously
The Bank of Canada might want to start rethinking this ultra-hawkish stance, but that’s the worst possible scenario with wages also rising. It has now been two consecutive negative reports. USD/CAD jumped to 1.3038 from 1.3000 before the data.