USD/CAD Heading Down to the 200 SMA Again
USD/CAD turned bearish this week as April employment came in strong, while the Oil made a reversal off the lows
USD/CAD has been following the FED policy projections, being bullish until October last year when the FED started giving signals that they were going to start slowing down with rate hikes and stop at some point. In the last meeting on Wednesday, the FED decided to raise rates by 0.25%, in line with market anticipations.
Although, during the press conference, FED chairman Jerome Powell attempted to ease any concerns among investors by stating that the US banking system was reliable and stable. However, his remarks on the need to focus on lowering inflation while not specifying how this would be achieved left some confusion among market participants. The USD retreated initially, then turned bullish which sent USD/CAD up and down.
Since the middle of April, the Canadian dollar has been trading in a bullish trend, following a significant decline, which coincided with a drop in crude Oil prices. The concerns around a slowdown in the global economy have led to a revision of demand forecasts, and the ongoing banking crisis has not allowed commodity-linked currencies to thrive.
However, the Canadian dollar got a boost yesterday, following a better-than-expected balance of trade report, which showed a surplus. This development together with a rebound in WTI Oil rebounded off the lows below $64 and peeped above $70 for a while, allowed the CAD to gain ground against the USD, which was slightly impacted by a higher-than-expected initial jobless claims print.
Bank of Canada governor Macklem also made some hawkish comments which might have given an extra reason to USD/CAD sellers to send the price toward the 200 SMA (purple) on the H4 chart. Meanwhile, today’s unemployment rate from Canada was expected to tick higher to 5.1%, with employment growth slowing down to +20,000 from +34,700 in March.
Canada April Employment Report
- Prior month 34.7K
- Employment gain for April 41.4K vs 20.0K estimate
- Unemployment rate 5.0% versus 5.1% expected
- Full-time employment -6.2K versus 18.8 K last month
- Part-time employment 47.6K versus 15.9 K last month
- Participation rate 65.6% vs 65.6% last month
- Average hourly wages permanent employees 5.2% versus 5.2% last month
Other highlights
- Employment growth among core-aged men (25-54 years) and men aged 55+; steady for core-aged and older women; little change for male and female youth.
- Sectors with employment increases: wholesale and retail trade, transportation and warehousing, information/culture/recreation, and educational services; decrease in business services.
- Employment rose in Ontario and Prince Edward Island, declined in Manitoba, and remained stable in other provinces.
- Average hourly wages increased 5.2% (+$1.66 to $33.38) year-over-year in April (not seasonally adjusted).
- Part-time employment increased while full-time employment held steady; 15.2% of part-time workers involuntarily working part-time.
- Private sector employees increased by 299,000 (+2.3%) year-over-year, public sector increased by 81,000 (+2.0%), and self-employment remained unchanged, below pre-COVID-19 levels.
Looking at the different sectors, the winners and losers are showing:
USD/CAD Live Chart
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