USD Bulls Eye Further Upside Post Hot NFP Print

USD/CAD PRICE, CHARTS AND ANALYSIS:

Read More: The Bank of Canada: A Trader’s Guide

USDCAD had finally broken above the October 2022 descending trendline this week but has since run into some resistance just shy of the 1.3800 mark. This could just be a short-term retracement before a bullish continuation.

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US AND CANADIAN LABOR MARKET DATA

The September US jobs report was released a short while ago coming in hot and well above expectations. US nonfarm payrolls increased by 336K in September 2023, well above an upwardly revised 227K in August, and beating market forecasts of 170K. It is the strongest job gain in eight months, and well above the 70K-100K needed per month to keep up with the growth in the working-age population, signaling that the labor market is gradually easing but remains resilient despite the Fed’s tightening campaign.

On a similar note, the Canadian economy created 63.8k jobs for the month of September which is also the highest in 8 months. Market expectations were for a 20k increase but smashed estimates thanks to a substantial rise in employment in the education services sector which added 66k jobs. The unemployment rate remained resilient holding at the 5.5% in September.

The immediate aftermath of the data releases saw increased probabilities for rate hikes from both the US Federal Reserve and the Bank of Canada (BoC). Money markets price in a 38% chance of a Bank of Canada rate hike on October 25th, up from 28% before the jobs data.

ECONOMIC CALENDAR AND EVENT RISK AHEAD

The next seven days are dominated by US data before Canadian inflation on the October 17. US inflation is the biggest risk event to USDCAD in the week ahead and should be an intriguing one following today’s strong labor market data. The drop in average hourly earnings does bode well for the inflation fight but with a tight labor market the fear is that demand may remain elevated and in turn keep prices high.

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TECHNICAL ANALYSIS AND FINAL THOUGHTS

USDCAD

USDCAD finally broke above the October 2022 long-term descending trendline which means the Loonie is trading at its weakest level to the Greenback in about 7 months. Yesterday’s daily candle close was a shooting star which hinted at a deep retracement but following today’s data a run higher to 1.3900 resistance level.

Immediate support on the downside rests at 1.3650 with a break lower bringing the 20-day MA around 1.3560 into focus. The bullish bias remains intact as long as the 1.3460 swing low isn’t broken.

USD/CAD Daily Chart

Source: TradingView, prepared by Zain Vawda

IG CLIENT SENTIMENT

Taking a look at the IG client sentiment data and we can see that retail traders are currently net SHORT with 72% of Traders holding short positions.

For Full Breakdown of the Daily and Weekly Changes in Client Sentiment as well Tips on How to use it, Get Your Free Guide Below.

— Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @zvawda