USDCAD Overnight Range 1.3712-1.3816    

The US dollar has reversed yesterday’s losses despite today’s nonfarm payrolls report missing expectations. The US gained 151,000 jobs in January (forecast 190,000) but what caught the markets attention was the drop in the unemployment rate to 4.9% and the increase in average hourly earnings (0.5% vs 0.3% forecast). This report goes a long way in dispelling the notion that Fed rate hikes are on hold.

The Canadian employment report was also weaker than expected posting a loss of 5,500 jobs (forecast +5.500). However, a narrowing in the trade deficit due to a rise in exports went a long way in taking the sting out of the jobs report.   Unfortunately, the steepness of this weeks USDCAD drop combined with the more positive US economic outlook pushed USDCAD back above 1.3800 from 1.3740

Overnight, FX traders took a time-out ahead of the US nonfarm payrolls report, (NFP) after a couple of days of tumultuous trading. It hasn’t been a good week for US dollar bulls.  All G-10 and major emerging market currencies have posted large gains in the past week.

The Canadian dollar had gotten a reprieve from the volatility created by oil price swings until the NFP report.  Since then, the rising US dollar vs G-10 currencies has also put downward pressure on WTI which has dropped back below $31.30/b suggesting a steeper drop to $30.00/b.  In turn, USDCAD could extend gains to 1.3900.  The Ivey PMI index reported a stellar 66 vs forecast of 50 which should limit USDCAD gains, at least today.

USDCAD technical outlook

The USDCAD technicals are bullish following the break above 1.3770 resistance.  The break above 1.3800 warns of further gains toward the 1.3840-1.3860 zone. A break above 1.3860 would lead to a test of 1.3900. A move back below 1.3850 suggests further weakness to 1.3680.  For today, USDCAD support is at 1.3760 and 1.3730.  Resistance is at 1.3840 and 1.3870

Forecast Range for the day 1.3730-1.3830

Chart USDCAD 1 hour