USD/CAD Price Prediction – Job Reports Push Canadian Dollar To New Lows

Key Insights

• The U.S. Dollar Index is up by about 1% after the release of strong job market data. 
• In Canada, job market reports were disappointing. 
• WTI oil is trading at multi-month lows, which puts additional pressure on the Canadian currency.

Dollar Rallies As Non Farm Payrolls Report Exceeds Expectations

USD/CAD gained strong upside momentum after the U.S. and Canada released employment reports for July.

In Canada, the Employment Change report indicated that the economy lost 30,600 jobs in July, compared to analyst consensus, which called for a gain of 20,000 jobs. Unemployment Rate remained unchanged at 4.9% as Participation Rate declined.

The real shock for the market came from the U.S. Non Farm Payrolls report indicated that the U.S. economy added 528,000 jobs in July, compared to analyst consensus of 250,000. The previous reading was revised from 372,000 to 398,000. Unemployment Rate declined from 3.6% to 3.5%. Put simply, the job market remains in a good shape.

Traders have immediately reacted to the news. The probability of a 75 bps hike at the next Fed meeting increased to 63.5%. Not surprisingly, expectations of a hawkish Fed provided strong support to the U.S. dollar, which rallied against a broad basket of currencies.

WTI Oil Tests New Lows

The difference between the U.S. employment reports and Canada’s employment reports is bullish for USD/CAD. In addition, recession fears continue to put pressure on the oil market.

WTI oil managed to settle below the $90 level and is testing multi-month lows. Strong dollar may put additional pressure on commodity markets and push WTI oil to new lows.

In case WTI oil gains additional downside momentum and heads towards the $95 level, Canadian dollar and other commodity-related currencies will find themselves under more pressure. A combination of strong dollar and weak oil may push USD/CAD above the 1.3000 level in the upcoming trading sessions.

For a look at all of today’s economic events, check out our economic calendar.