USD/CAD had formed a top at around 1.32 and after the second failure to hold above that level, this pair reversed lower again yesterday. The USD started retreating after being bullish for a period, while the Bank of Cabana raised interest rates by 0.75% after the 1.00% increase in the last meeting. Although more than from the rate hike, the CAD benefited from comments by the Bank of Canada that they were going to continue with rate hikes in the foreseeable future.

The bullish reversal in crude Oil also helped the CAD, so sellers pushed this pair below the neckline of the double top which stood at 1.3070 and below 1.30 as well. The target of the decline for the double top was 1.2940, which this air reached yesterday.

USD/CAD H4 Chart – The Previous Resistance Held As Support

The 50 SMA also helped to hold the price during the decline

The previous support at that level held the decline, aided by the 50 SMA (yellow) and we saw a retrace higher above 1.30, where the price closed before the end of the week. The August employment report from Canada was negative and the unemployment rate jumped higher. This means that the Bank of Canada might not be able to keep up the pace of rate hikes, which is negative news for the CAD. So, we might see USD/CAD heading for 1.32 again this coming weak.

Canadian Jobs Data for August 2022

• August employment -39.7K vs +15.0K expected
• July employment was -30.6K
• Unemployment rate +5.4% vs +5.0% expected (prior 4.9%)
• Full time -77.2K vs -13.1K prior
• Part-time +37.5K vs -17.5K prior
• Participation rate 64.8% vs 64.7% prior
• Average hourly wages 5.6% YoY vs 5.4% prior

The Bank of Canada might want to start re-thinking that uber-hawkish stance but this is the worst possible scenario with wages also ticking up. That’s now two negative reports in a row. USD/CAD has jumped to 1.3038 from 1.3000 before the data.

USD/CAD Live Chart