USD/CAD forms a double-top pattern ahead of Canada jobs data

Written by: Crispus Nyaga
April 8, 2021
  • The USD/CAD price has formed a double-top pattern ahead of Canada jobs data.
  • Analysts expect that the country’s unemployment rate declined to 8.0%.
  • On Wednesday, data by Ivey showed that Canada’s PMI rose in March.

The USD/CAD is hovering near its highest level in a week as forex traders reflect on the Fed minutes, low oil prices, and the strong Canadian numbers. It is trading at 1.2600, which is slightly below the March 30 high of 1.2647.

USD/CAD
USD/CAD price action

Strong Canadian data

The Ivey Institute published relatively strong Canadian PMI numbers yesterday. The PMI increased to 72.9 in March, up from the February high of 60. This was the highest level since 2011 and is the best among its peers. 

Canada PMI
Canada PMI data

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This growth happened as all sub-indexes rose as demand increased. The employment sub-index rose to 62.7 while inventories rose to 61.7. Supplier deliveries and prices indexes rose to 39.6 and 75.1, respectively.

In general, the Canadian economy has done well, helped by the overall higher oil prices and rising demand from the United States. In the first quarter alone, the US government offered stimulus worth more than $2.8 trillion. 

Canada benefited from this since it is one of the biggest trading partner of the country. Indeed, data by Statistics Canada showed that while the country’s exports dropped in February, those to the US rose.

While oil prices have dropped recently, they are still substantially higher than where they were when the year started. 

The USD/CAD is also wavering after the Federal Reserve published the latest minutes of the March meeting. The minutes revealed that the members committed to an easy money policy even as US bond yields rise and unemployment rate falls. This has pushed the dollar relatively lower than its peer currencies.

Most importantly, the USDCAD is waiting for the March employment numbers that will come out tomorrow. Economists expect the data to show that the unemployment rate dropped from 8.2% in February to 8.0% in March. They also expect the country to add more than 100,000 jobs as the economy reopened.

USD/CAD technical forecast

USD/CAD
USD/CAD technical chart

The four-hour chart shows that the USD/CAD has been on a slow upward trend recently. It is approaching the important resistance at 1.2647 and is slightly above the 25-day and 15-day exponential moving averages (EMA). The two lines of the MACD have also moved above the neutral line. Notably, the pair seems to be forming a double top pattern that is usually a bearish sign. Therefore, there is a possibility that the pair will decline and restest the ascending red trendline at 1.2140.