The US dollar is one of the top-performing currencies as the recent risk rally takes a breath in today’s trade. Risk currencies and stocks are overall down for the day as markets start questioning the timing of the tariff rollback between the US and China.
The Canadian dollar, on the other side, lost ground against all major currencies on disappointing labour market statistics for October, released today. Employment slightly declined by 1.8K, missing market expectations of a 14.7K rise. The unemployment rate was unchanged at 5.5% in October.
While markets were pricing in only a small probability of a rate cut in Canada at the next Bank of Canada meeting, today’s employment report showed that the central bank could follow the US Fed in monetary easing to support the economy.
The Canadian dollar was also impacted by lower oil prices, with Brent crude giving back weekly gains and falling a whopping 1.8% on a strong US dollar rally.
From a technical standpoint, the USD/CAD pair found support at the channel pullback mentioned in yesterday’s article.
Overall, the recent uptrend in the pair looks quite overstretched as the RSI is forming a hidden bearish divergence.
Another important hurdle for buyers is the 61.8% Fib level at 1.3235, measured from the peak to the trough of the October downtrend. As of 2:20 p.m. London time, the US dollar traded at 1.3230 against the loonie. If we see a break above that level, the next possible resistance lies at the October 9 high of 1.3345.
To the downside, sellers have to keep an eye on the strong horizontal support at the 1.3200 level, followed by the November 5 low of 1.3115.