After breaking below 1.32 area with a daily close, USD/CAD is currently making a slow pullback towards the 1.32 area before continuing with the trend for further bearish momentum.
CAD has been the dominant currency in the pair while USD has been struggling for gains for several reasons: the recent partial government shutdown, downbeat economic reports, and the dovish Fed's rhetoric. The shutdown in the US derailed the economic growth in Q4 and Q1. Most FED officials signaled no more rate hikes in the coming months. FED Chair Powell does not rule out 2 rate hikes by the end of this year which kept the market sentiment a bit biased towards USD. Recently ISM Non-Manufacturing PMI report was published with a decrease to 56.7 from the previous figure of 57.6 which was expected to increase to 57.2 and Final Services PMI report was published unchanged at 54.2. Last week, the US Labor Department released mixed employment reports. The FED expresses optimistic expectations about the upcoming growth in the domestic economy. As a result, USD is holding the upper hand over CAD.
This week Canada's Employment Change report is going to be published which is expected to decrease to 6.5k from the previous figure of 9.3k and Unemployment Rate is also expected to edge up to 5.7% from the previous value of 5.6%. The Bank of Canada is quite optimistic about the domestic economy. However, downbeat employment report may lead to severe weakness in the economy while USD is regaining momentum.
Meanwhile, USD is expected to gain momentum over CAD, whereas a negative employment report from Canada may push CAD down that may result in a counter-move.
Now let us look at the technical view. The price is currently trading higher towards 1.32 area where the dynamic level of 20 EMA is also expected to act as resistance. As the price remains contained below 1.3200 area with a daily close, the bearish bias is expected to continue with a target towards 1.2850 support area. On the contrary, a daily close above 1.32 is expected to lead the price higher towards 1.3350 resistance area in the future.
SUPPORT: 1.2850, 1.30
RESISTANCE: 1.3200, 1.3350
BIAS: BEARISH
MOMENTUM: VOLATILE
