Traders will be focusing on the USD/CAD pair on Friday. The United States and Canada will release monthly labor market data for April. Since the ADP report on private sector jobs turned out to be worse than expected, the US Department of Labor final employment report is also very likely to indicate a significant drop in employment last month.
Economists predict a decrease in the number of jobs by 21 853 million, while unemployment in the United States could reach 14%! If the data are confirmed or, moreover, turn out to be worse, then it is worth waiting for new sell-offs in the US stock market. This will cause an increase in domestic demand for the dollar and will cause a drop in commodity prices.
In this case, the greenback's position could suffer in the foreign exchange market. Negative numbers from the US labor market will signal a slowdown in the country's economy, which may soon face not just a recession, but also a depression. The dollar index was trading in a narrow range around 100.26 on Thursday. However, it could not hold on to high values during the US session.
USDX
Following the United States, data on the country's labor market for April will be published by Statistics Canada. Recall that at the very beginning of the year this indicator slightly improved, unemployment rose to 5.6% in February, and jumped to 7.8% in March. Attention, unemployment is projected to increase to 18% in April!
The growth of unemployment is a negative factor for the loonie. The expected market jump in the indicator can seriously put pressure on the Canadian dollar, which recently looks quite attractive. If data from the labor market is better than the previous value, then the Canadian dollar should strengthen.
Whatever the indicator and reaction of traders, the high volatility of the USD/CAD pair and the entire financial market is ensured. It is better to wait out this storm.
In general, the pair maintains a forecast for an increase. This is due not only to the publication of macroeconomic data, but also taking into account the limited prospects for oil growth. Today, the pair was trading in the range between the short-term support level of 1.4015 and the resistance level of 1.4170. A breakdown in one of the parties is likely to determine the further dynamics of the course for several days, and maybe weeks.
USD/CAD
It is worth noting that in the evening session, the Canadian dollar appreciably strengthened by entering the territory of 1.39 along with the US counterpart. However, tomorrow will be a new day. Purchases above the support level of 1.4015 will look safe.
Meanwhile, Reuters predicted the growth of the Canadian dollar, but with reservation. The world economy, for starters, should show signs of recovery along with oil prices.
"The loonie should win if the global economy begins to recover in the second half of the year. Although the straight curve implies that WTI will be just over $30 in December, a combination of reduced production and growing demand could push the quote to $45," the strategists write.
It is expected that the Canadian dollar will initially drop to 1.42 against the greenback. Then within 6 months it will strengthen to 1.39, and in a year it will reach 1.36. This is 4% higher than in the April forecast.
The Canadian dollar's recovery factors include rising prices and the global economy. In addition, Tiff Macklem, who assumes the position of Bank of Canada governor, according to experts, should have a direct impact on monetary policy. The Bank of Canada's response to the coronavirus crisis is expected to shift from financial market support to accelerating economic recovery.
However, the recovery may be delayed. Friday's labor market data is likely to show how much.
The most successful G10 currency last year - the Canadian dollar - has lost 8% of its value since January. At the same time, experts continue to believe that the loonie will "fight for the best levels observed shortly before the pandemic."
