USD/CAD Price Analysis: Bulls Dominating amid Growing Divergence

USD/CAD Price Analysis: Bulls Dominating amid Growing Divergence

  • Canada’s economic activity shrank for the first time in July.
  • US payrolls increased for the 19th month in July.
  • The Fed is expected to raise rates aggressively.

Today’s USD/CAD price analysis is bullish as the US economy continues to grow while Canada’s economic activity drops.

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The Ivey PMI gauges monthly changes in economic activity as reported by a panel of Canadian purchasing managers. According to Ivey Purchasing Managers Index (PMI) data released Friday, Canada’s economic activity shrank in July for the first time this year as employment growth slowed and prices dropped.

For the first time since December 2021, the seasonally adjusted index dropped below the 50-point mark, which denotes a decline in activity, to 49.6 from 62.2 in June. This weakened the Canadian dollar against the US dollar. USD/CAD has started a bullish trend in the 4-hour chart boosted by the US dollar, which rallied after the positive jobs report.

Last month, there were 528,000 more jobs added in the United States. The payrolls increased for the 19th month in July, exceeding economists’ predictions of just 250,000 new positions.

“If the US economy is in a recession, no one seems to have told employers,” said Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina. “We suspect this data will give the Fed the confidence it needs to push ahead aggressively with its fight against inflation.”

All of the jobs lost as a result of the COVID-19 pandemic have now been recovered. However, there are still roughly 597,000 unfilled positions in the government sector. There are currently 32,000 more jobs overall than there were in February 2020.

USD/CAD key events today

USD/CAD investors do not expect significant news releases today, so the pair might consolidate until something meaningful comes out.

USD/CAD technical price analysis: Price set to bounce off the 30-SMA towards 1.29850

USD?CAD price analysis

After a strong bullish move, USD/CAD has made a retracement to the 30-SMA. This SMA has acted as support before and might do so again. The RSI is trading above 50, showing bullish momentum is strong.

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If the SMA holds support, the price will likely retest resistance at 1.29850, then at 1.30494. However, a break below the 30-SMA would retest the 1.27823 support level.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.