USD/CAD forecast after the diverging US and Canada jobs data

By:
on Aug 5, 2022
  • The USD/CAD price made a bullish breakout after the Canada jobs data.
  • The Canadian economy lost over 30.6k jobs in July this year.
  • The US, on the other hand, added over 528k jobs in the same month.

The USD/CAD forex pair made a strong bullish comeback after the latest US and Canada jobs data. The pair rose to a high of 1.2985, the highest point since July 18th. It has risen by more than 1.8% from its lowest point this month.

US and Canada labor market diverge

The USD to CAD price rose sharply after the diverging job numbers from the US and Canada. Data from Canada revealed that the country continued losing jobs in July as the recovery stalled. 

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Precisely, the Canadian economy lost 30.6k jobs in July after it shed another 43.2k jobs in the previous month. Economists were expecting the economy to add over 20k jobs. 17.5k people in part-time and 13.1k people in full-time employment lost their jobs.

Further data revealed that the participation rate dropped from 64.9% to 64.7%. Again, this figure was worse than the estimated increase of 65.3%.

The only positive thing in the report was the unemployment rate. According to Statistics Canada, the unemployment rate remained unchanged at 4.9%.

The USD/CAD forex price rose after data from the US showed that the economy was still strong. The official nonfarm payrolls (NFP) data showed that the economy added over 528k jobs in July. The agency even made a positive adjustment to the previous estimate from 372k to 398k.

Additional data in the report revealed that the American unemployment rate dropped from 3.6% to 3.5%. Again, this was better than the median estimate of 3.6%.

Wages also continued rising in July. The average hourly earnings rose from 0.4% to 0.5% on a month-on-month basis. It remained at 5.2% on a YoY basis.

Therefore, the USD/CAD price rose as investors anticipate a more hawkish Federal Reserve. They believe that the bank will deliver several more rates this year.

USD/CAD forecast

USD/CAD

The four-hour chart shows that the USD to CAD exchange rate made a strong bullish breakout on Friday. As it rose, the pair managed to move above the upper side of the descending channel. At the same time, it crossed the 25-day and 50-day moving averages.

The Relative Strength Index (RSI) continued rising and is approaching the overbought level. Therefore, the pair will likely continue rising as nills target the next key resistance level at 1.3085.

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