USD/CAD Bulls to Target 1.32 on US Data ahead of Friday’s NFPs

It is a busy day for the USD/CAD. For the Loonie, Q2 GDP numbers for Canada will draw plenty of interest. However, while forecasts are Loonie positive, there is unlikely to be a shift in sentiment toward the Bank of Canada’s outlook on interest rates. Softer inflation and housing sector woes remain headaches over the near term.

Forecasts are for the Canadian economy to expand by 1.0% in Q2, up from 0.8% in Q1. However, economists forecast the BoC to stand pat on monetary policy at next week’s meeting. An unexpected surge in economic activity could tip the balance in favor of the Loonie.

USD/CAD Price Action

At the time of writing, the USD/CAD was up 0.17% to 1.31145. A mixed morning saw the USD/CAD fall to an early low of 1.30628 before striking a high of 1.31161.

Technical Indicators

The USD/CAD will need to avoid the 1.3057 pivot to target the First Major Resistance Level (R1) at 1.3143.

Ahead of the US session, sliding crude oil prices supported a USD/CAD move back to 1.31. Positive US stats, hawkish FMOC member chatter, and falling crude oil prices could overshadow Canadian GDP numbers to bring the Major Resistance Levels into play.

In the event of an extended rally, the USD/CAD should test sellers at the Second Major Resistance Level at 1.3194 and resistance at 1.32.

The Third Major Resistance Level (R3) sits at 1.3330.

A fall through the pivot would bring the First Major Support Level (S1) at 1.3007 into play.

Barring a rebound in crude oil prices or dovish FOMC member chatter, the USD/CAD should steer clear of sub-1.2950 and the Second Major Support Level (S2) at 1.2921.

The Third Major Support Level (S3) sits at 1.2785.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bullish signal. This morning, the USD/CAD pair stood above the 50-day EMA, currently at 1.29989.

The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering positive signals for the USD/CAD pair.

Tuesday’s break out from the 50-day EMA supports a return to 1.32 for the first time since July 14.

However, a USD/CAD fall through S1 (1.3007) and the 50-day EMA (1.29989) would bring the 100-day EMA (1.29586) into play.

The US Session

It is a quieter day ahead on the economic calendar. For the Dollar, July ADP nonfarm employment change figures will draw interest. While positive numbers would continue to support the DXY move towards 110, the key numbers will be Friday’s nonfarm payrolls and wage growth figures.

From the Fed, FOMC member Mester will draw attention ahead of the ADP numbers. Following Fed Chair Powell’s Jackson Hole speech, the markets need to assess whether FOMC members stick to the script.