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Perceptions and reality on the US economy are dictating direction in the USD/CAD, as FXStreet’s analysts Joseph Trevisani notes. The USD/CAD rallied on Friday’s better than expected US employment report after reaching its lowest level since late February earlier in the week. Weaker pricing for WTI also put a drag on the loonie despite the positive Employment Change report out of Ottawa. 

Key quotes

“Despite the improving North American and global economic picture West Texas Intermediate (WTI) is stalled below the $42 resistance line which had marked the pricing bottom for four years. It will be difficult for the Canadian dollar to strengthen until this major component of its economy is again profitable.”

“The current but perhaps waning scenario has the US recovery in serious straits from the second wave of the coronavirus. There are good reasons to doubt the accuracy of that picture. Caseloads, hospitalizations and fatalities in the affected states have been declining rapidly. The forward-looking new orders indexes in manufacturing and services were very strong in July. The labor market is the crux of the economic situation and new business equals new hiring.”

“If US statistics continue to improve the USD/CAD will follow them higher. The area between 1.3400 and 1.3625 was well traded from the second week of June until the third week of July and offers plentiful resistance lines. The area below 1.3330 is similar though the support comes from the pre-pandemic ranges from June 2019 through March 2020.”