The USDCAD forex pair is testing a critical trendline ahead of employment data from the Canadian and US economies.
USDCAD – Weekly Chart
USDCAD is trading at 1.3477 after a recent failure at 1.3837 and now has support at this uptrend line. If the data favours the Canadian dollar, the pair could test the 1.3224 support level in the coming sessions.
The Canadian currency has been boosted against the greenback after the recent pause in Federal Reserve rate hike expectations. Last week also saw growth revised lower as experts warn of a potential recession in the United States economy.
A rising oil price should also benefit the Canadian dollar after the weekend culminated with an OPEC+ production cut of over 1.1 million barrels per day for the year ahead.
Canada will be the first to view the latest employment statistics, expecting a slowdown in job hiring to 12k positions in the month from 21.8k. The unemployment rate is also expected to increase to 5.1% from 5%. The United States economy is also likely to produce a slowdown in jobs, with 240k added on the month compared to 311k last month.
The Federal Reserve was set to slow down the pace of rate hikes with the recent banking turmoil. Still, it may even have to reverse if oil prices continue increasing.
Meanwhile, veteran researcher Luke Gromen states the Federal Reserve only has “terrible choices” due to the government’s debt and deficit spending.
“It’s not a banking system problem,” he said. “It’s a US Treasury G7 sovereign debt, the balance of payments problem. Treasuries underpin everything,” Gromen said. “It’s collateral for the whole system. So if we’re going to have a Treasury problem, we’re going to have an everything problem.”
USDCAD Forecast
The ADP employment report in the US is always released ahead of the NFPs, and the latest has flagged a potential employment miss. Private sector hiring rose by just 145,000 in March, down from 261,000 in February and below the market estimate of 210,000.
Traders should monitor the employment data for a potential break lower in USDCAD.
