USD/CAD extends recovery above 1.3000 amid firmer DXY, investors await Employment data

• USD/CAD is attempting to balance above 1.3000 as DXY rebounds ahead of the US NFP.
• Lower employment generation by the Canadian economy may weigh pressure on loonie.
• The US Average Hours Earnings data will be of utmost importance.

The USD/CAD pair is aiming to establish comfortably above the psychological resistance of 1.3000 as the US dollar index (DXY) has performed strongly in the Asian session. The DXY is carry-forwarding the bullish tone to the European session and may recapture the latest 19-year high at 107.26.

The greenback bulls have been underpinned by the market participants despite the lower estimates for the US Nonfarm Payrolls (NFP). The market participants are expecting the release of the US NFP at 270k, much lower than the prior print of 390k. Apart from that, the Unemployment Rate is expected to remain unchanged at 3.6%.

The employment level in the US economy is sustaining at the targeted levels, therefore a decline in the employment generation figures won’t affect the DXY much. However, the data that could fetch trouble for the DXY is the Average Hourly Earnings.

Price pressures are soaring in the US economy and stagnancy in the earnings may result in lower income for the households and henceforth, lower consumption and savings. This may affect the overall demand, especially for durable goods as their demand could be postponed.

On the loonie front, the Net Change in Employment is seen at 22.5K, lower than the former release of 39.8k. The Unemployment Rate is seen stable at 5.1%. The Canadian jobless rate is higher than the required levels and lower employment generation may affect the Bank of Canada (BOC) to announce an interest rate hike in a presumptuous manner.