Looine Dropped as US Jobs Boost USDBy: Eddy Peng Aug 7, 2017
The loonie continued to lose its value for a fifth straight day on Friday from the high record since the July of 2015, and fell 1.7 percent against the U.S. dollar last week but is still up nearly 9 percent since early May.
With some positive signs that U.S. employers hired more workers than expected in July and raised their wages, the greenback rallied against a basket of major currencies last week. Rise in hiring data in July along with stronger household incomes and buoyant consumer confidence may put another plan of raising interest rates later this year conducted by the Federal Reserve into schedule as it seeks to normalize monetary policy.
Additionally good performance of change in non-farm payrolls which was beating the forecast propelled the recent growth. Although the corrective bounce in the U.S. dollar is happening, markets still show questioned about its long-term growth as President Donald Trump’s policy agenda has run aground.
The value decline of loonie can be seen as a corrective rally in the U.S. dollar, pushed mostly from the greenback side in relation to the U.S. jobs data. Jobs data showed that Canadian labor market starts to tighten, as Canada’s economy added 10,900 jobs in July, mostly in full-time employment, Statistics Canada said, while the jobless rate fell to its lowest since October 2008.
The currency’s strongest level of the session was C$1.24332, while it touched its weakest since July 18 at C$1.2667. Helped by the Bank of Canada raising interest rates last month for the first time in nearly seven years, the loonie surged more than 9 percent since early May.
Oil prices are one of Canada’s major exports and are playing an important role in its GDP, rising on Friday but were down on the week, pressured by rising OPEC exports and strong U.S. output.
The USD/CAD declined slightly by nearly 0.1 percent to C$1.26342 as of 12:05 p.m. in Sydney. Technically with a sign of rising Relative Strength Index (RSI) of 44.8623, the USD/CAD is consolidating in a daily developing ascending channel. It may cease to rise after touching a key resistance found at a descending 20-day moving average.
In the event that the USD/CAD breaks lower propelled by MA5, traders should first watch for the pair to decline further. Alternatively if prices continue to edge higher, the USD/CAD must first break above Friday’s high of 1.26674, then test the ascending channel line near 1.26815.
When we analyse by Fibonacci retracement, 1.27370 (23.6% retracement) could be seen as another resistance if the pair continues to rise.
Chart 1: USDCAD Daily