The USD/CAD exchange rate continued its strong sell-off after the latest Canada jobs data. It retreated to the crucial support at 1.3450 on Friday, its lowest level since February 24th. This decline also coincided with the retreat of the US dollar index (DXY).
Canada jobs dataThe biggest forex news on Friday was January’s Canada jobs report. According to Statistics Canada, the economy added over 37k jobs in January after it added just 0.1k in the previous month. This increase was better than the median estimate of 16k.
The closely watched unemployment rate dropped to 5.7% in January while the labor participation rate came in at 65.4%. Most importantly, wage growth continued rising during the month. Average hourly wages of permanent employees rose by 5.6% during the month.
These numbers came a week after the US released a blemish-free non-farm payrolls (NFP) report. According to the Bureau of Labor Statistics (BLS), the American economy added over 350k jobs in January as the unemployment rate remained at 3.7%. Wage growth continued rising by over 4.5% during the month.
Therefore, focus now is on the next decisions by the Fed and the Bank of Canada, which will next meet in March. In multiple statements this week, several Fed officials have ruled out the need for cutting rates in the next meeting since the economy remains strong.
The American economy expanded by 3.3% in the fourth quarter while there are signs that inflation is falling. The BLS will publish the latest inflation report next week and analysts expect it to come in at 3.2%, an improvement from the previous 3.4%.
Meanwhile, the Bank of Canada is also expected to continue holding rates steady in its March meeting since inflation rose to 3.4% in January. The bank targets inflation of 2.0%. Like in the US, the main driver for inflation in Canada is the housing sector.
USD/CAD technical analysis
The USD to CAD exchange rate plunged after the strong Canadian jobs data. On the 4H chart, the pair retreated below the key support at 1.3450, where it struggled to move below on Thursday. It is now approaching the important point at 1.3360, the neckline of the triple-top pattern at 1.3540.
The pair has also moved below the 50-period moving average while the Percentage Price Oscillator (PPO) moved below the neutral point. Therefore, the outlook for the pair is bearish, with the next level to watch being the neckline at 1.3360. A move below that level will see it crashing to the psychological point at 1.3300.
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