USDCAD could see volatility on Friday with both US and Canadian employment.
USDCAD: Daily Chart
USD/CAD on the weekly chart shows another test of support could lead to a push higher in the pair.
For the Canadian economy, a bounce is expected from last month’s -17.3k jobs report. Analysts expect to see a 20k addition to the employment market but a 0.1% unemployment gain.
The US economy has been performing better, and a 225k job gain is expected, which is lower than last month’s 339k but would lead to a drop in unemployment to 3.6%.
The US dollar should get a boost after employers slowed downsizing in June, with the lowest number of layoffs since October 2022. According to the latest Challenger job cuts report released on Thursday, US employers said they were cutting 40,709 jobs in June, down 49% from the number of cuts announced in May.
“The drop in cuts is not unusual for the summer months. In fact, June is historically the slowest month on average for announcements. It is also possible that the deep job losses predicted due to inflation and interest rates will not come to pass, particularly as the Fed holds rates,” Andrew Challenger, senior vice president of Challenger, said.
Chris Rupkey, Chief Economist at FWDBONDS, told Yahoo Finance:
“If you go back in history, back to 1989, the Fed funds rate was at 10% to slow the economy. Before the stock market bubble in 2000, the Fed funds rate was 6.5%. So right now, inflation is worse than it was in 2000. And it’s worse than it was in 1989. So I just feel like I’ve seen this story before… So if inflation is running about 5%, maybe the Fed funds rate interest rates should be a good 200 basis points above that, which would put it at 7%”.
Analysts are still mixed on the terminal Fed Funds rate, but a strong showing for the labour market on Friday could boost the US dollar and hurt stocks. That should see the Canadian dollar lose this support level with its own weaker job performance in recent months.
