USD/CAD Traded Mostly Flat Amid Strengthening Dollar Post Jobs Data

Insights

• The dollar became firmer while the Euro declined due to the Russia-Ukraine focus
• A key part of the yield curve inverted after robust US jobs data
• Gold and silver prices declined as yields and the dollar increased 
• Oil prices whipsawed as EIA meets to discuss deploying more oil reserves

The dollar remains little changed against the Loonie as robust US economic data paused downward pressure expected in the near term. Benchmark yields ticked up several basis points. The 2s-10s part of the yield curve inverted following solid jobs data, a key signal of recession in the coming years. Gold prices moved lower as yields, and the dollar rose. Oil prices fell in volatile trading as members of the International Energy Agency (IEA) met to discuss releasing more oil reserves. The US plans to release 180 mln barrels, or 1 mln barrels per day, over the next six months. This release is the largest ever from the US Strategic Petroleum Reserves (SPR). Despite the release, the oil supply will still be a challenge in the coming months.

A plethora of critical economic data was released on Friday morning. Nonfarm payrolls, which measure the number of workers in the US, rose by 431,000 in March. The reading was slightly below the estimated number of 490,000 despite mounting inflation and the possibility of an economic downturn. The unemployment rate decreased by 0.2% to 3.6%, below expectations of 3.7%. Average hourly earnings rose to 0.4%, in line with expectations. The reading is used to follow inflation closely. Today’s economic data had no significant surprises, signaling that the Fed will likely raise rates at the six remaining FOMC meetings this year.

Technical Analysis

The USD/CAD makes slight gains as the dollar strengthens on positive economic data signaling a strengthening labor market. Despite this, the currency pair faces downward pressure and will continue to trade downwards. Although the pair crossed above the critical 1.25 level, the Loonie remains bullish in the near term due to the supply shortage of oil and continuing Ukraine-Russia tensions. If the pair tested 1.26, the downward trend might be less certain. Support is seen at the horizontal trendline near the January lows of 1.246. Resistance is seen near the ten-day moving average near 1.252. Short-term momentum turns positive as the fast stochastic had a crossover buy signal.

The medium-term momentum is negative but has positive momentum despite the MACD line generating 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 moving average of the MACD line).