USDCAD bulls flirt with 1.3750 ahead of US/Canada Employment data

• USDCAD steadies around two-week top, probes six-day uptrend.
• Firmer yields, risk aversion underpinned US dollar but mixed US data tests DXY bulls.
• Cautious mood ahead of the key statistics may restrict the pair’s immediate moves.
• Hawkish Fed, sour sentiment and firmer yields could favor bulls, NFP is the key.

USDCAD remains sidelined around 1.3745, after refreshing the fortnight high, as traders await crucial employment data from the US and Canada during early Friday. The Loonie pair rose for six consecutive days in the past before the latest inaction around the multi-day top. That said, the market’s rush for risk safety and softer prices of Canada’s key export, the Crude Oil, appeared to have favored the quote’s latest upside.

WTI crude oil prices dropped nearly 1.7% to $87.98 by the end of Thursday’s North American session, trading nearby by the press time, as fears of recession amplify as the major central banks keep fueling the benchmark rates. Also weighing on the black gold prices could be the covid woes from China and the latest headlines suggesting the Group of Seven (G7) has agreed to put a cap on Russian oil prices.

Elsewhere, the US Dollar Index (DXY) extended its post-Fed run-up towards refreshing the highest levels in two weeks. Increased risk aversion amid fears of higher rates and economic slowdown, as conveyed by policymakers from the Bank of England (BOE) and the European Central Bank (ECB), appears the key catalyst for the greenback’s latest run-up. On the same line could be the firmer yields. However, mixed US data seemed to have probed the DXY bulls ahead of the all-important US Nonfarm Payrolls (NFP).

US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior.

Amid these plays, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007.

Moving on, USDCAD traders may witness lackluster moves ahead of the key jobs report from the US and Canada. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. On the other hand, Canada’s Net Change in Employment may also ease to 10K versus 21.1K prior with the Unemployment Rate likely witnessing an uptick to 5.3% from 5.2% prior.

That said, the scheduled numbers may fail to impress USDCAD traders by matching the downbeat forecasts. However, the Fed’s hawkish performance versus the Bank of Canada’s (BOC) easy rate hike could keep the buyers hopeful, especially amid softer Oil prices.

Also read: Canadian October Jobs Preview: Labor market upturn in the doldrums

Technical analysis

A successful trading beyond the three-week-old resistance line, now support around 1.3650, keeps the USDCAD pair buyers hopeful of visiting the yearly high surrounding 1.3980.