Traders and investors are closely watching key economic events scheduled for today, including Canada’s Employment Change and the US Nonfarm Employment Change, both of which are expected to influence currency markets significantly. In particular, USDCAD has been on an upward trajectory since late September, driven by a mix of technical factors and shifting market sentiment. With major employment data releases looming, market participants will seek further clarity on the strength of the North American labor markets, which could either reinforce or challenge the ongoing trend.
Overview
Traders and investors are closely watching key economic events scheduled for today, including Canada’s Employment Change and the US Nonfarm Employment Change, both of which are expected to influence currency markets significantly. In particular, USDCAD has been on an upward trajectory since late September, driven by a mix of technical factors and shifting market sentiment. With major employment data releases looming, market participants will seek further clarity on the strength of the North American labor markets, which could either reinforce or challenge the ongoing trend.
Key Economic Events
Friday 17:30 (GMT+2) - Canada: Employment Change (CAD)
Friday 17:30 (GMT+2) - USA: Nonfarm Employment Change (USD)
Technical Analysis
The USDCAD has been surging since September 25 after reaching a low of 1.34187. The rally was triggered by a bullish Harami Japanese candlestick pattern demonstrating the bears' weakness in maintaining control of the market. Furthermore, a bullish reversal, referred to in technical analysis as a "non-failure swing," has intensified the upward momentum. Specifically, the trough at 1.34187 did not fall below the prior trough, and prices subsequently exceeded the peak at 1.36467, thus confirming the uptrend.
Additionally, the currency pair emerged above the 50-period Exponential Moving Average (EMA), and the upward trend was further validated by bullish signals from both the Momentum oscillator and the Relative Strength Index (RSI). The Momentum oscillator remains above the 100 baseline, while the RSI is also above 50, indicating continued potential for further gains in the near term.
Potential Upside Targets
Should the bulls maintain market control, traders may direct their attention toward the four potential resistance levels below:
1.44663: The initial resistance is 1.44663, which represents the daily high from December 18.
1.45760: The second price target is identified at 1.45760, corresponding to the 161.8% Fibonacci Extension drawn from the high point, 1.44663, to the low point, 1.42788.
1.46186: The third target is established at 1.46186, aligning with the weekly resistance, R3, estimated using the standard Pivot Points methodology.
1.47597: An additional price target is estimated at 1.47597, which corresponds to the 261.8% Fibonacci Extension drawn from the high point, 1.44663, to the low point, 1.42788.
Potential Downside Targets
Should the sellers take market control, traders may consider the four potential support levels listed below:
1.42788: The first level of support is identified at 1.42788, representing the daily low from January 6.
1.42427: The second support level is 1.42427, reflecting the weekly support, S3, calculated using the standard Pivot Points methodology.
1.41653: The third support level is identified at 1.41653, corresponding to 161.8% Fibonacci Extension drawn from the low point, 1.42788, to the high point, 1.44625.
1.39816: An additional downward target is observed at 1.39816, corresponding to the 423.6% Fibonacci Extension drawn from the low point, 1.42788, to the high point, 1.44625.
Fundamentals
The US labor market is expected to show steady growth in December, with forecasters projecting 165,000 new jobs and an unchanged unemployment rate of 4.2%. While the projected figure represents a slowdown from November’s 227,000 jobs, it still highlights a labor market that has remained robust despite broader economic concerns.
If confirmed, the annual job gains for 2024 would total 2.1 million—below 2023’s 3 million but stronger than pre-pandemic levels. Economists note, however, that job creation has been uneven, with hiring concentrated in a few sectors and rising difficulty for unemployed workers in finding new jobs.
Federal Reserve policymakers are expected to adopt a cautious approach to further rate cuts, with some analysts suggesting the cutting cycle could end if the labor market stabilizes. Forecasters continue to monitor the unemployment rate, which, if it rises above 4.5%, could prompt a reevaluation of the Fed’s rate strategy.
The December jobs report, due today, will include annual revisions to household survey data, potentially impacting key metrics like unemployment and labor force participation rates. Further revisions in February may also provide clarity on discrepancies in previously reported employment figures.
Conclusion
As traders await the critical employment data from both the US and Canada, the USDCAD’s recent bullish momentum faces a pivotal moment. Key technical indicators suggest potential for further gains, though downside risks remain if employment figures disappoint or market sentiment shifts. With the Federal Reserve and Bank of Canada closely monitoring labor market conditions, today's data could significantly influence near-term monetary policy expectations and drive volatility in the currency pair. Traders should remain alert to any deviations from forecasts, as they may shape the USDCAD’s trajectory in the coming sessions.