- USD/CAD rose to fresh weekly highs near 1.2800, 100 pips above previous lows on Friday.
- The catalyst for the move higher was weak Canadian/US labor market data.
The USD/CAD received a double whammy of bullish momentum on Friday in the form of much stronger-than-expected US labor market data (USD bullish) and much weaker-than-expected Canadian labor market data (CAD bearish). USD/CAD dipped to fresh weekly highs near 1.2800, an intraday rally of over 100 pips or up roughly 0.7% from the previous session’s lows at 1.2665. The pair appeared to run out of upside momentum as it neared the 1.2800 level, with sellers approaching last week’s highs and a meltdown in crude oil prices helping give the loonie a floor. WTI is up over $2.0 on the day and at one point hit $93.00, new seven-year intraday highs.
In light of the latest US and Canadian employment data for January, USD/CAD traders will now re-evaluate their Fed/BoC bets for the coming months. Friday’s US jobs data, which saw a massive rise in NFPs, big wage growth and a jump in labor force participation, have been interpreted as increasing the risk of a 50-year move. bp in March. Meanwhile, market analysts commented that they did not believe the latest Canadian figures would deter the BoC from rising 25bps in March, as the latest job losses relate to the Omicron lockouts and are expected to return quickly.
However, the latest data highlights some economic divergence between the US and Canada and raises the risk that the Fed will outperform the BoC on monetary tightening this year, a development that could offer long-term support for the USD. /CAD Next week, the main focus for USD/CAD trading will be on Wednesday’s US consumer price inflation data which may offer markets more reasons to bet on a 50bps hike in March by part of the Federal Reserve. Otherwise, the Fed and BoC speech will be a key theme to watch.
Additional technical levels
Source: Fx Street
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