USD/CAD struggles below 1.2700 despite softer oil prices, Canada jobs eyed
- USD/CAD fades corrective pullback after snapping three-day uptrend the previous day.
- Broad USD weakness favored bears, oil dropped the most in three weeks on stockpile, growth concerns.
- Risk-off mood can renew buying but Canadian employment figure become the key.
USD/CAD buyers fail to retake controls after witnessing the first daily negative of the week, despite the latest bounce off 1.2622. That said, the quote seesaws around 1.2665 amid Friday’s Asian session.
The US dollar’s biggest losses in a week, the first daily fall in four days, could be best linked to the loonie pair’s losses on Thursday. In doing so, the quote ignores the heavy fall in prices of Canada’s main export item WTI crude oil.
The US Dollar Index (DXY) dropped 0.20% daily after the US 10-year Treasury yields fell 4.3 basis points (bps) to revisit the sub-1.30% area, around 1.297% by the end of the North American session. The dismal performance of the 30-year note auction widely chattered for the Treasury yields moves.
For oil prices, the covid fears and improvement in the official inventory data, released weekly by the US Energy Information Administration (EIA), are likely main catalysts for the latest fall, the heaviest since August 20. The EIA Crude Oil Stocks Change marked -1.529M figures versus -4.612M expected and -7.169M prior, suggesting a lesser draw of stockpile for the week ended on September 03. Talking about the covid woes, Australia’s second consecutive day of increase in cases joined grim numbers from the US, the UK and India, not to forget an uptick in China daily covid infections, to portray the worrisome conditions. US President Joe Biden recently confirmed the worrisome conditions while saying, “We are in a tough stretch on covid and it could last for a while.”
Amid these plays, Wall Street benchmarks closed in the red for the second consecutive day whereas the S&P 500 Futures also print mild losses by the press time.
Given the risk-off mood, the USD/CAD may recover but the scheduled release of Canada’s August month jobs report will be important to follow. The Net Change in Employment is likely to improve from 94K to 100K whereas the Unemployment Rate could decline from 7.5% to 7.3%, helping the Bank of Canada (BOC) hawks after witnessing a blow earlier in the week.
Read: Canadian Jobs Preview: Employment sector improves but uncertainty prevails
Technical analysis
Although the recent high near 1.2765 and July’s peak near 1.2810 challenges USD/CAD bulls, the downside momentum may remain less effective unless successfully breaking the 200-SMA level of 1.2525.