USD/CAD Exchange Rate Prediction – The Dollar Rallies Following Strong Payroll Report

Key Insights

• The dollar rallied as interest rate differentials widened.
• Treasury yields rose following strong payroll data. 
• Oil prices rose on an unchanged rig count. 

USD/CAD rebounded as yields moved higher, pulling the interest rate differential in favor of the greenback. A rally in oil prices was offsetting the gains, which generally favor the Loonie. Benchmark rebounded following the stronger than expected unemployment report and nonfarm payroll.

Nonfarm payrolls rose by 390K while the unemployment rate moved to 3.6%. Expectations were for the jobs market to expand by about 328K jobs. The unemployment rate was expected to decline further to 3.5%.

Private sector jobs grew by 333K jobs in May. The labor force participation rate increased slightly to 62.3%, meaning more people entered the jobs market.

Average hourly wages increased by 0.3%. Expectations were for average hourly wages to rise by 0.4%. This scenario might be a sign that wage inflation is moderating. The year-over-year increase in wages was 5.2%.

Technical Analysis

The USD/CAD rebounded but the bounce was dead-cat. There is strong resistance near the 200-day moving average at 1.2658.

Support is seen near the April 20th low near 1.246. Short-term momentum has turned positive as the fast stochastic had a crossover buy signal. Prices are oversold. The fast stochastic is printing a reading of 12, below the oversold trigger level of 20.

Medium-term momentum turns negative as the MACD line might generate a crossover sell signal.

This scenario happens when the MACD line (the 12-day moving average minus the 26-day moving average) crosses the MACD signal line (the 9-day MA of the MACD line). The trajectory of the MACD is in positive territory, which reflects an upward trend in price movement.