The USD/CAD pair struggled to build on overnight modest recovery and was seen oscillating in a narrow trading range, above the 1.30 psychological mark. Resurgent US Dollar demand on Thursday, supported by the latest FOMC monetary policy update, reaffirming the gradual rate hike path, helped the pair to snap four consecutive days of losing streak and bounce off 100-day SMA support, or 1-1/2 month lows.The uptick, however, lacked strong conviction, with a combination of supporting factors also doing little to provide any fresh bullish impetus on the last trading day of the week. After a brief pause, the USD regained positive traction but failed to attract any buying interest around the major. Traders even shrugged off the prevalent negative tone around crude oil prices, which tend to undermine demand for the commodity-linked currency – Loonie, and now seemed to wait on the sideline ahead of today’s event risk – the release of US monthly jobs report.
US NFP Could Serve as a Trigger To Help Pair Make a Breakout
The FOMC mentioned the word ‘strong’ multiple times in statement from the August rate decision. Despite the fact that the bank made no material changes to monetary policy, the focus on continued strength in the US economy denotes the potential for the bank to remain in a hawkish stance as we trade into 2019. Coming into the meeting, markets were looking for another two rate hikes in 2018, and odds for a 25 basis point move in both September and December strengthened through yesterday’s announcement. But now we have the potential for markets to catch up to the Fed’s forecast of looking for another three rate hikes in 2019. If inflation remains strong, and if jobs numbers continue to print with strength, we could see that theme of higher US rates and a strong US Dollar continue to play out. However price action of US Dollar index indicates that the price right now is around the resistance level which has tendency to turnaround bullish advances over the past two months.
Today’s Non-Farm Payrolls data could give bulls the motivation that they need to finally drive thru, but most likely we’re going to be looking for clues around inflation to elicit that strength. Today’s report will also include Average Hourly Earnings and the expectation is for 2.7% annualized growth there in July. If this comes out really hot, we could see that Dollar strength extend. USD/CAD has been unable to break below the 1.3000 level since the start of the week. Apart from the keenly watched NFP print, the Canadian trade balance data might also contribute towards infusing some volatility around the major and possibly help traders grab some meaningful trading opportunities. As of writing this article the pair is trading at 1.3016 with 0.05% decrease in value and the price action remains trapped within this week’s upper level of resistance around 1.3038/39 which if breached will help pair target 1.3045 and 1.3070 resistance levels. On the flip side a move below week’s support of 1.2980 could result in pair aiming for 1.2975 to 1.2950 support levels.
This article was originally posted on FX Empire
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