USD/CAD Eyes 1.3700 Breakout as 2 Big Job Reports and Tariffs Shake Markets
The USD/CAD pair is trading steady near 1.3680 on Friday as investors adopt a wait-and-see approach before the highly...
Quick overview
- The USD/CAD pair is stable around 1.3680 as investors await key labor reports from the U.S. and Canada.
- The U.S. is expected to add only 130,000 jobs in May, indicating a cooling job market, while Canada's outlook predicts a loss of 15,000 jobs.
- Despite concerns over economic momentum and trade tensions, a positive tone in U.S.-China relations has provided some support for the U.S. dollar.
- Technically, USD/CAD shows potential bullish signals, with key resistance at 1.3700 and support at 1.3630.
The USD/CAD pair is trading steady near 1.3680 on Friday as investors adopt a wait-and-see approach before the highly anticipated labor reports from both the United States and Canada.
These job market figures are expected to provide crucial insights into the trajectory of the North American economy.
All Eyes on Dual Jobs Reports
In the United States, expectations for the Nonfarm Payrolls (NFP) suggest a cooling job market with projections of just 130,000 new jobs in May, down significantly from April’s 171,000.
The unemployment rate is expected to remain unchanged at 4.2%, while average hourly earnings are forecasted to show a slight moderation to 3.7% year-over-year growth, compared to April’s 3.8%.
Market sentiment remains cautious amid this week’s disappointing ADP private payroll report, which heightened concerns about slowing economic momentum. These concerns have been amplified by President Trump’s recent trade threats, keeping investors on edge.
However, not all developments have been negative. A more positive tone emerged regarding trade relations after President Trump described a “very good” 90-minute call with China’s Xi Jinping, suggesting a potential thawing in the ongoing tariff standoff. This glimmer of optimism has helped stabilize the U.S. Dollar Index near 98.80.
Canadian Job Market Facing Challenges
North of the border, Canada’s labor market outlook appears even more concerning. Economists are projecting a loss of 15,000 jobs in May, a stark reversal from April’s modest gain of 7,400 positions.
Moreover, the unemployment rate is forecasted to inch up to 7.0% from 6.9%, highlighting growing caution among Canadian employers.
Many businesses are reportedly putting hiring plans on hold as they assess the potential impact of future U.S. tariffs. This uncertainty is weighing on the Canadian dollar, giving the greenback a slight edge despite mixed signals from the U.S. labor market.
In essence, both economies are showing signs of softness, but the USD’s traditional safe-haven status and the easing tension in U.S.-China trade relations are currently giving it a modest advantage—at least for the time being.
USD/CAD Technical Picture: Bulls Building Momentum
From a technical perspective, USD/CAD remains capped below a falling trendline and the 50-period exponential moving average (EMA), both of which are hovering near 1.3697. However, the pair has formed higher lows since testing 1.3635, suggesting potential base-building is underway.
The MACD indicator is showing signs of a bullish crossover forming, while candle patterns reveal repeated rejections of lower levels with spinning tops—another potentially bullish signal.
Key Levels to Watch:
- Resistance: 1.3700
- Support: 1.3630
USD/CAD’s Potential Trade Setup:
If the price breaks and closes above 1.3700 with strong volume, we could see a breakout toward 1.3784. Traders might consider a long entry at 1.3710 with a protective stop placed below 1.3630. Overall momentum remains neutral but poised for action. Expect this consolidation phase to resolve sharply once the jobs data is released at 12:30 GMT today.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Related Articles
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
