- USD/CAD rose sharply on Friday to test 1.2800 following strong US jobs data and amid a general tone of risk aversion.
- USD/CAD is currently up 0.7% on the day and 1.5% off Thursday’s multi-week low below 1.2600.
The USD/CAD reversed sharply higher on Friday after the release of what traders described as an excellent US labor market report buoyed the US dollar and, amid a clearly risk-averse market tone, weighed on the greenback. most risk-sensitive Canadian. The pair started the session below 1.2700, but at one point rose as much as 0.9% to almost test 1.2800. Currently trading at 1.2760, USD/CAD is trading up around 0.7% on the day, with the pair now trading around 1.5% above multi-week lows hit on Thursday below 1.2600. The Canadian dollar is not performing as poorly as its European counterparts such as GBP, EUR or SEK, which continue to suffer amid fears about the war in Ukraine and its economic fallout, which are likely to be felt most acutely in Europe.
Similarly, however, the Canadian dollar has surprisingly failed to keep pace with other G10 commodity-pegged currencies such as the kiwi and the Australian dollar, as oil prices appear to end a historic week on a strong note. Since the end of February, 1.2800 has offered strong resistance that was only really broken once when Russia surprised global markets with its invasion of Ukraine just over a week ago. As long as commodity prices continue to rise, and many commodity strategists fear this may be the case as evidence of severe disruption to Russian exports continues to mount, USD/CAD may well remain capped by recent highs.
Following a much stronger-than-anticipated February Canadian Ivey PMI survey release on Friday and a smaller-than-expected decline in labor productivity in the fourth quarter, attention turns to official Canadian labor market data scheduled for release. Post next Friday. Another factor that should work in the Canadian dollar’s favor in the coming months is the BoC, which raised interest rates by 25 bps earlier in the week, and strong economic data is expected to support this stance. But the US consumer price inflation data for February, due out next Thursday, poses upside risks to the US dollar and thus USD/CAD and should also be noted.
Additional technical levels
Source: Fx Street
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