Employment figures from the United States and Canada on Friday should guide the pair.
USDCAD: Weekly Chart
The USDCAD pair has found support at the 1.322 level and is back inside a trading range. A strong number for the US could see further gains.
Expectations for both countries are for a stagnation in job numbers this month.
The Canadian job market is expected to add 21k jobs this month, after almost 60k last month.
The US is expected to post 200k jobs after 209k were delivered in June. The employment market has been strong in the US, which was one of the reasons that the Federal Reserve continued to hike rates.
ADP National Employment figures on Wednesday also showed a moderation in wage growth, which is good for the inflation outlook. That joins upbeat data for the US economy on inflation and consumer spending, which is raising hopes that the economy will have the “soft landing” expected by Federal Reserve officials.
“This is the latest in ‘soft-landing’ economic statistics where Fed officials are seeing inflation slowing down without creating the massive unemployment seen in a recession,” said Christopher Rupkey, chief economist at FWDBONDS.
“As long as inflation remains on the low side in upcoming reports, the Fed is likely to skip the September meeting when it comes to hiking rates again.”
The ADP data showed private payrolls increasing by 324,000 jobs last month after surging by 455,000 in June. Economists polled by Reuters had forecast that private employment would increase by 189,000.
US stocks were hit on Wednesday after Fitch Ratings’ surprise move to downgrade the US government’s credit rating. The dollar rose against a basket of currencies, but US Treasury prices fell.
The jump in ADP numbers could see a surprise upside to the US jobs number on Friday and see the USDCAD pair jump higher into the current trading range.
