July 5, 2019

USDCAD Open (6:00 am EDT) 1.3065-68   Overnight Range (until 5:45 am PDT)  1.3048-1.3127

The Loonie got knocked to the canvas.  The one-two combination of Canadian and US employment reports sent USDCAD soaring from a pre-data level of 1.3069 to 1.3127 in the immediate aftermath.

Statistics Canada announced that Canada lost 2,200 jobs in June while the unemployment rate ticked up to 5.5% from 5.4% in May.  The headline number looked worse than the details suggest.  The job losses were in the part-time category.  Also, Q2 employment rose 132,000, virtually all in full-time work.

Source:  Statistics Canada

The Canadian employment report wasn’t the primary catalyst for the USDCAD gains.  The American nonfarm payrolls data did the damage.  The US Bureau of Labor Statistics reported: “nonfarm payroll employment increased by 224,000 in June, and the unemployment rate was little changed at 3.7 percent.”

The US dollar inched higher overnight, in part because of expectations for a robust NFP report.  The demand accelerated when the US data was released.  Following last month’s weaker than expected jobs data, (75,000) some analysts suggested the Fed would be forced to cut rates.  Today’s results may delay that outcome.

EURUSD dropped from an overnight peak of 1.1286 to 1.1256 before the NFP release and then touched 1.1234 afterwards.  The decisive break of resistance in the 1.1260 area suggests further losses to 1.1160.  The nomination of IMF Managing Director Christine Lagarde to replace ECB President Mario Draghi and the dovish ECB outlook is weighing on prices.

GBPUSD is also being hammered.  A series of weak UK economic reports and the increased risk of a “no-deal” Brexit has driven GBPUSD to 1.2515, a level last seen in January.

The post-Canada and US payroll rally in USDCAD is likely to be short-lived. Other than today’s data, the bulk of recent Canadian economic reports suggest the Canadian economy is growing, as the Bank of Canada would say, “at trend.”  Firm oil prices and expectations for a neutral Bank of Canada statement next week will limit the topside.USDCAD Technical outlook

The intraday USDCAD technicals are bearish while prices are below 1.3130 which represents the and is looking for another test of support at 1.3050 and then the 1.2990-1.3000 area.   FX price action around major “big figure” levels tends to be choppy with lot’s of false breaks.  However, a decisive move below 1.3000, would turn the level into resistance.  A rally above 1.3130 targets 1.3160 but only a move above 1.3360 would negate the downward bias. For today, USDCAD support is at 1.3050 and 1.3130.  Resistance is at 1.3090 and 1.3130.50.  Today’s Range 1.3050-1.3130

Chart: USDCAD  4  hour