Canadian dollar outlook influenced by labor market data in US and Canada

USDCAD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	-0.23%	-31 Pips
Week to-date	0.37%	51 Pips
July	0.35%	47 Pips

Upcoming key events (London Time)

Fri 01:30 PM CAD Labour Force Net Change in Employment

What happened lately

In the United States, the initial unemployment insurance claims for the week ending 5th July decreased to 227,000 from the previous 232,000 (revised from 233,000) as reported by the Department of Labor. This drop in unemployment claims indicates a tightening in the labor market, which may reflect underlying economic strength and potential confidence in the economy. A decrease in claims suggests fewer individuals are claiming unemployment benefits, which could imply that more people are finding jobs or fewer are losing them. Such positive labor market data typically supports the local currency, as it can lead to expectations of economic growth and possibly influence monetary policy decisions.

Meanwhile, in Canada, an upcoming key high-impact economic event is the Labour Force Net Change in Employment data release, scheduled for Friday at 1:30 PM. This data provides insights into the labor market performance in Canada, including any changes in employment levels. A positive or better-than-expected employment change could boost market confidence in the Canadian economy, potentially leading to a strengthening of the Canadian Dollar (CAD). Conversely, a negative or worse-than-anticipated outcome might weaken the CAD, as it would suggest weaker than expected labor market conditions.

The latest data showing a decrease in US unemployment claims may put some downward pressure on the USDCAD, as it signifies strength in the US economy. However, market participants will closely watch the Canadian employment data, as any significant variations from expectations could lead to volatility in the USDCAD exchange rate. If the Canadian employment figures come in strongly, it could bolster the CAD, leading to a further decline in the USDCAD pair. On the other hand, if the data disappoints, the Canadian Dollar may weaken against the US Dollar, potentially leading to an appreciation of the USDCAD rate. Thus, both countries’ labor market indicators will play a crucial role in determining the near-term direction of the USDCAD exchange rate.

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What can we expect from USDCAD today?

USDCAD on Thursday dropped -0.23% to 1.36540. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for USDCAD looks bearish as the pair posted lower in Thursday trading session.

Looking ahead for the day, immediate support level is at S1 1.3634 with break below could see further selling pressure towards S2 at 1.3614. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.37080 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.36510 would indicate selling pressure.

For the week to-date, take note that USDCAD is mixed as compared to the prior week.

Key levels to watch out:

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