- Loonie heads for the third decline out of the last four days.
- USD/CAD finds support at the 1.3360 zone, the bearish tone remains in place.
The USD/CAD pair extended the declined during the American session and printed a fresh daily low 1.3361, matching yesterday’s bottom. The area around 1.3360 capped the downside again. As of writing the pair trades at 1.3365, on its way to the lowest daily close since April 22.
A weaker US Dollar and an improvement in risk sentiment helped the Loonie. The greenback remains under pressure amid rate cut talk. The WSJ reported the Fed will debate on whether to cut interest rates as soon as at the June meeting.
Today data showed Canadian trade numbers came in much better than expected in April, with the trade deficit reaching the lowest in six months. “Looking at quarterly data, trade looks set for a rebound in Q2 after having subtracted no less than 3.9 percentage point from GDP in Q1. Real exports are on pace to expand an annualized 7.8% in the quarter on the back of their biggest back-to-back monthly rises in three years in March and April, while imports look set to drop 4.9%. This is consistent with our call for a GDP print north of 2.0% in the second quarter of the year”, said Jocelyn Paquet, analysts at NBF.
On Friday, in the US and Canada, the official employment reports are due. In the US, after the negative surprise of the ADP private employment report, the market consensus of 180K would probably look like a good number now.
In Canada, analysts at TDS look for the labour market to disappoint in May with employment falling by 5k which should push the unemployment rate to 5.8%, while wages should soften to 2.5% y/y on a sizeable base-effect from May 2018. Market consensus expect an increase of 8K in employment after the 106,5K reading of April. “We have previously argued that recent labour market strength is unwarranted by the economic backdrop and last
month’s blockbuster print has not changed our view“, explained analysts at TDS.
Key levels
To the downside, the area around 1.3350/60 has become a critical support that capped the slide over the last two months. A break lower would likely clear the way to more losses, targeting 1.3310. To the upside, short-term resistance levels might be seen at 1.3425, 1.3450, and 1.3470.
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