The Canadian dollar is in positive territory in the Friday session. Currently, USD/CAD is trading at 1.2619, down 0.34% on the day. Earlier in the day, the pair moved into 1.25-territory.
July employment numbers expected to improve
It has been a busy week for the Canadian dollar, which started the week with strong losses but has partially recovered. The upward swing could continue on Friday, as Canada’s job data for July is expected to show strong growth. The economy is projected to have created 100 thousand new jobs, while the unemployment rate is expected to fall to 7.3%, down from 7.5%. If the readings are within expectations, the Bank of Canada may consider scaling down its QE programme, which would be bullish for the Canadian dollar.
BOC stays cautious
The Bank of Canada opted to remain cautious at its policy meeting and did not make any moves. The message to the markets was dovish, with policy makers warning that a fourth wave of Covid-19 and continuing supply-chain issues could hurt the recovery. Still, the Bank said that it expected the economy to improve in the second half of 2021.
In the US, inflation is one of the most important issues for the markets, which means that US inflation indicators are sure to find themselves under close scrutiny. The US will release the Producer Price Index (PPI) for August, with the consensus at 8.2%, compared to 7.8% in July. Inflation remains red-hot in the US, with the Federal Reserve stubbornly insisting that surge in transitory and that inflation will ease. If we continue to see inflation rising in the final months of 2021, investors will become more sceptical of the Fed’s stance, and policymakers may have to adjust monetary policy in order to curb inflation, which is well above the Fed’s target of 2%.
USD/CAD Technical
- On the upside, there is resistance at 1.2719. This is followed by resistance at 1.2785
- USD/CAD is testing support at 1.2625. Below, there is support at 1.2465