- USD/CAD attracted some buying and updated the daily high during the early American session.
- Expectations of further Fed tightening acted as a tailwind for the USD and extended support.
- The mixed US/Canada employment data did little to provide any significant lift to the pair.
- A rally in crude oil prices underpinned the loonie and prevented the bulls from making aggressive bets.
The pair USD/CAD quickly reversed an early drop in the American session and jumped to a fresh daily high, around the 1.2875 region following the US/Canada monthly jobs report.
The NFP headline showed that the US economy added 428,000 new jobs in April compared to a forecast of 391,000. This, however, was offset by a slight disappointment in the unemployment rate, which held steady at 3.6% against an expected drop of 3.5%. Furthermore, the median hourly wage also disappointed market expectations and increased by 0.3% MoM in April.
Mixed US jobs data did little to provide any lift, although expectations that the Fed would need to take more drastic action to rein in inflation acted as a tailwind for the dollar. In fact, markets are still pricing in a further 200bp rate hike for the remainder of 2022, made evident by a further rise in US Treasury yields.
Aside from this, a generally weaker tone in equity markets further boosted safe-haven flows into the dollar. This, coupled with rather unimpressive Canadian employment data, acted as a tailwind for the USD/CAD pair. Statistics Canada reported that the number of employed people increased by 15,300 in April, against an expected 55,000, and the unemployment rate fell to 5.2%.
This, however, was offset by a modest rebound in crude oil prices, which provided some support for the commodity-linked Canadian dollar and capped any further gains for the USD/CAD pair. Therefore, it will be wise to wait for some follow-on buying before traders begin to position themselves for an extension of the recent appreciation move seen over the last two weeks or so.
Technical levels
Source: Fx Street
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