USD/CAD Bears Eye Further Declines as Key Support Breaks Ahead of Non-Farm Payrolls
Friday Market Overview:
The US dollar continues its recent downward trajectory ahead of the crucial Non-Farm Payrolls (NFP) report. The dollar’s decline has been exacerbated by Federal Reserve Chairman Jerome Powell’s less hawkish comments and the weaker-than-expected ADP payroll report. Additionally, the outcomes of the UK and French elections have bolstered European currencies. It is anticipated that US employers added fewer jobs in June, potentially indicating a cooling labor demand, which could prompt the Fed to consider rate cuts later this year. Meanwhile, oil prices have surged to a three-month high, strengthening the Canadian dollar (CAD) and putting further pressure on the USD/CAD pair.
Technical Analysis:
On the daily chart, USD/CAD has experienced significant downward pressure following a three-month period of price compression. The break below the Ichimoku cloud and the ascending trendline has positioned sellers as the dominant force, keeping the price below the Kijun-sen and Tenkan-sen lines. The loss of the key support at 1.36232 has paved the way for further declines. The immediate target for continued bearish momentum is 1.35874, the lowest level since mid-April. If this support fails, the next levels to watch are 1.35418 and 1.34915.
Alternative Scenario:
If the labor market surprises with stronger-than-expected data, showing insufficient cooling, the immediate resistance for buyers will be the edge of the Ichimoku cloud and the broken trendline near 1.36735. The bearish trend will only be invalidated if the price sustainably moves above the Kijun-sen.
Impactful Events:
Economists predict that the Non-Farm Payrolls (NFP) for June will reach 191,000, down from 272,000 in May. Additionally, the average hourly wage growth is estimated to decline slightly to 0.3% month-on-month, with the unemployment rate expected to remain steady at 4.0%. Weaker-than-expected data could further weigh on the dollar, while stronger data could halt the current downward trend of the US dollar index.
Oscillators and Risk Warnings:
RSI (Relative Strength Index): Bearish, indicating continued selling pressure.
MACD (Moving Average Convergence Divergence): Bearish, supporting the downtrend.
Moving Averages: Bearish, reflecting the current negative price action.
Market Overview and Key Levels
Resistance Levels:
- Resistance 2: 1.37459
- Resistance 1: 1.36735
Current Price (at the time of analysis): 1.36062
Support Levels:
- Support 1: 1.35874
- Support 2: 1.35418
- Support 3: 1.34915
Conclusion:
USD/CAD is under significant selling pressure after breaking key support levels, driven by a weaker US dollar and a stronger Canadian dollar supported by rising oil prices. The immediate target for further declines is 1.35874, with potential moves towards 1.35418 and 1.34915 if the bearish momentum continues. However, stronger-than-expected US labor market data could prompt a reversal, with resistance at 1.36735 being the first key level to watch.
Investors should closely monitor the upcoming NFP report and related labor market data, as these will provide crucial insights into the economic outlook and potential monetary policy adjustments, influencing the broader market dynamics.
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