USD/CAD forms head and shoulders amid strong US NFP data

The USD/CAD price rose after the latest Canadian jobs and US non-farm payrolls (NFP) data. The pair rose to a high of 1.2250, which was slightly higher than July’s low of 1.2423.

US and Canada jobs data

The American and Canadian economies added thousands of jobs in July as their economies continued to reopen. In the US, data by the Bureau of Labour Statistics (BLS) showed that the economy added more than 943k jobs in July. This was higherthan the previous increase of more than 850k.

The unemployment rate, which measures the number of Americans not in the workforce, declined from 5.9% to 5.4% in July. This was better than what analysts polled by Reuters were expecting. Wages continued rising in July as companies continued finding difficulties finding workers. In total, wages rose from 3.6% in June to 4.0% in July.

These numbers show that the American labour market is continuing tightening since more states have reopened. More businesses like hotels and restaurants have been adding thousands of jobs every month. However, the new vaccine and mask mandates will likely hamper job growth in the near term. In a note, an economist at ADP said:

“I had been looking at September as a point when we could gain momentum—with schools back in session and vaccines widely available. But with the Delta variant, we need to rethink that.”

The USD/CAD pair also rose after the latest Canadian jobs numbers. According to Statistics Canada, the country added more than 94 jobs in July after adding more than 230k in the previous month. This addition was mostly because the country started to reopen in June after being in lockdown for several months. 

The country’s unemployment rate declined from 7.8% in June to 7.5% in July. Wage growth also accelerated while the participation rate rose to 65.2%. The pair will later react to the latest Canadian PMI data. 

USD/CAD forecast

The USD/USD tilted higher after the relatively weak Canadian jobs data and strong US NFPs. The pair rose to 1.2535, which was slightly above the July low of 1.2423. On the four-hour chart, the pair has formed a head and shoulders pattern, which is typically a bearish sign. It is also along the 25-day and 15-day moving averages. Therefore, while the pair rose after the decision, there is a possibility that it will resume the downward trend in the near term.