The US dollar was again in high demand throughout the market. And if more recently some currencies in pairs of the "major group" could resist the greenback, on Friday we witnessed the "hegemony" of the greenback. Among the obstinate ones was the Canadian dollar, which, along with the Australian currency, restrained the onslaught of dollar bulls. The USD/CAD pair declined despite many fundamental factors that de facto signaled a reversal of the downward trend. For example, on April 5, that is, on Tuesday, the loonie strengthened to the level of 1.2402 – the last time the pair was at this level was in November 2021. But the bears could not enter the area of the 23rd figure. The US dollar began to gain momentum again – and this time quite confidently, after all, breaking the resistance of the loonie.
The loonie held the defense largely due to the hawkish attitude of the Bank of Canada. By and large, the US Federal Reserve and the Canadian central bank were on a par, systematically tightening their rhetoric and monetary policy parameters. Central banks raised the interest rate in March and declared further steps in this direction. Therefore, for many weeks, the loonie did not succumb to the onslaught of dollar bulls, using any weakening of the greenback in its favor.
To date, the situation has changed somewhat. Firstly, the Fed, so to speak, "legitimized" rumors that in May the interest rate will be increased by 50 points. Many Fed members directly or indirectly allowed such a scenario to develop. Similar theses were recorded in the minutes of the March Fed meeting. The text states that many members of the Committee expressed the opinion that raising the rate by 50 basis points at once "at one or more upcoming meetings" would be a justified step. According to analysts of the Goldman Sachs Group, the US central bank will decide on a 50-point increase not only at the May, but also at the June meeting. Then - 4 increases of 25 points.
It is worth noting that the Bank of Canada's next meeting will be held on April 13. On the eve of this meeting, rumors also appeared on the market that the Canadian central bank would raise the rate by 50 points at once. However, here such conversations are only at the level of assumptions – none of the representatives of the central bank of Canada hinted at such a scenario. Therefore, in this context, "the ball is on the side of the US currency."
It should also be emphasized that the US dollar is now in high demand against the background of increased anti-risk sentiment. Negotiations between Moscow and Kiev have not yet brought any results. An information vacuum has formed around the negotiation process again, which allows the safe dollar to feel very comfortable in the main currency pairs. The "Taiwan issue" is gradually coming to the fore: Beijing's rhetoric against Washington is becoming tougher and more belligerent.
Thus, macroeconomic and geopolitical factors strengthen the US currency, while the loonie is forced to retreat.
"Canadian Nonfarm", which was published on Friday, left an impression. The number of employed in March increased by only 72,000, with a growth forecast of 90,000. For comparison, we can say that in February this indicator came out at the level of 336,ooo. But the unemployment rate showed a positive trend in March, falling to 5.3% (from the previous value of 5.5%). This indicator resumed its decline after a rather sharp increase in January (up to 6.5%). Therefore, the March decline is quite important for the loonie, as it confirms the trend. Another positive aspect is the increase in the share of the economically active population. This indicator has grown to 65.4%. The component of the increase in the number of employed grew only due to the indicator of full employment, while the component of part-time employment turned out to be in the negative area (the ratio of +92,000/-20,000). At the same time, it is known that full-time positions imply higher salaries and social security, having a beneficial effect on the consumer activity of Canadians and, ultimately, on inflationary growth in the country.
In other words, the published figures did not support the Canadian. On the one hand, almost all the components of the release were released in the green zone. On the other hand, a rather weak growth in the number of employed was recorded. Whether the Canadian central bank focuses its attention on this nuance is an open question.
From a technical point of view, the USD/CAD pair tried to settle above the average line of the Bollinger Bands indicator on the D1 timeframe, which corresponds to the 1.2580 mark. On Friday morning, bulls rushed up, reaching 1.2618. However, they could not stay at this height and in the afternoon returned to the area of the 25th figure. And so short and long positions looked risky, given the "Friday factor". But if trading starts above 1.2580 on Monday, it is advisable to consider longs with the first target of 1.2650 (the Tenkan-sen line on D1) and the second target of 1.2670 (the lower limit of the Kumo cloud on the same timeframe).
