USD/CAD forecast: signal after the US NFP, Canada GDP data

The USD/CAD exchange rate drifted upwards on Friday as investors reacted to the mixed economic numbers from the United States and Canada. The pair jumped to a high of 1.3592, the highest level since Tuesday. This price was much higher than the intraweek low of 1.3495.

US and Canada economic data

The USD/CAD pair was in the spotlight on Friday as investors reflected on the latest data from Canada and the US. In Canada, numbers revealed that the economy expanded slower than expected.

The Canadian GDP came in at 0.0% in Q2, lower than the expected estimate of 0.3%. This increase translated to a YoY growth of 1.12%, which was less than the median estimate of 0.3%. The economy also contracted by 0.2% in June.

These numbers mean that the situation in Canada is not good considering that inflation remains much higher than the BoC’s target of 2.0%. It implies that the economy has moved into a stagflation phase.

The USD/CAD exchange rate also reacted to the latest US non-farm payrolls (NFP) data, which I previewed here. The data revealed that the American economy created 187k jobs in August after adding 157k in the previous month. This increase was better than the median estimate of 170k.

These numbers mean that the labor market is still strong. On a positive note for the Fed, the country’s unemployment rate rose to 3.8% while the average hourly earnings dropped from 4.4% to 4.3%. 

Therefore, there is a likelihood that the Federal Reserve will have the justification to leave rates unchanged in September. In theory, falling hourly earnings should help to lower the American inflation.

Data published on Thursday showed that the personal consumer expenditure (PCE) remained steady in August.

USD/CAD technical analysis

The USD/CAD exchange rate has been in a strong upward trend, helped by the stronger dollar. Along the way, the pair formed an ascending channel, which is shown in black. It made a bearish breakout below this channel in August and is now attempting to retest it.

The Relative Strength Index (RSI) has risen above the neutral point. Therefore, I suspect that the pair will likely continue rising as buyers target the year-to-date high of 1.3640.