The Canadian dollar bounced on Friday by nearly 0.27 percent or 0.00336 points, erasing part of losses in the previous day, amid tightening job market in Canada. It has been suffering significant loss for a month from the low record since May 2015, mainly due to a strong rebound of the U.S. dollar.
According to the Bureau of Labor Statistics reports, nonfarm payrolls released on Friday lost 33,000 jobs in September, which was the first monthly decline in seven years, even as the unemployment rate fell to 4.2 percent, the lowest since February 2001.
The loss of non-farm payrolls reflected the devastating effects from Hurricanes Harvey and Irma, which attacked Texas and Florida respectively. The number, however, was expected to be lower than usual, thus it may affect the right response in monetary policy from the Federal Reserve.
Economists surveyed by DailyFX expected payroll growth of 80,000 in September, compared with 169,000 in August. The unemployment rate was expected to hold steady at 4.4 percent. It declined even as the labor-force participation rate rose to 63.1 percent, its highest level all year and the best reading since March 2014.
As the tightening U.S. labor market that ought bring inflation back to its 2 percent target, New York Fed President William Dudley suggested that the Fed should keep gradually raising interest rates to tighten monetary policy.
Canada added 10,000 jobs in September as gains in full-time work of 112,000 offset a loss of part-time jobs of 102,000. It is the 10th straight month of employment gains the strongest wage increases in more than a year, showing that Canada’s labor market has more signs to be tightening.
Technically the USD/CAD has been in an ascending developing price channel, already breaking out 60-day moving average. This cannel as depicted below, has been created by connecting a series of swing highs and lows beginning with September 8’s price action. In the event that the USD/CAD breaks lower, traders should first watch for the pair to breakout beneath the lower channel. Alternatively if prices reverse higher, the USD/CAD must first break above Friday’s high of 1.25975, then test the ascending channel line near 1.26887.
The short-term outlook for USD/CAD can be seen from the Fibonacci retracement. At this moment, 1.25033 (61.8% retracement) is a support level for its current position, and there is still room for further rise.
Chart 1: USDCAD Daily
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