The USDCAD pair has been moving upwards without pullbacks for two weeks in a row. The American currency strengthened on Tuesday after the release of positive data on employment in the U.S. This forces market participants to wait for further monetary policy tightening by the Federal Reserve (Fed).
The dollar and bond yields strengthened due to the U.S. labor market data. An unexpected growth in the number of job openings in August highlights stable labor demand, analysts at NAB Resources stated.
U.S. Treasury Secretary Janet Yellen said on Tuesday she is highly optimistic about the economic outlook. Inflation will decline in the short term and the labor market is likely to remain "extremely strong".
Fed officials consider the rising yields on long-term U.S. Treasury bonds as evidence of the effectiveness of tight monetary policy. According to them, these dynamics may indicate the absence of greater risks for the economy.
Today the market is awaiting the U.S. ADP Nonfarm Employment Change report. Forecasts point to an expected decline by 16,000 jobs. This indicator allows to assess the state of the U.S. labor market before the publication of key indicators, which are expected on Friday.
Meanwhile, the Canadian dollar fell to a 6-month low because of rising long-term borrowing costs, pushing investors away. Canadian companies have been increasing prices more frequently and more significantly since the start of the pandemic, passing higher costs on to consumers. This behavior could exacerbate inflation, as Bank of Canada Deputy Governor Nicolas Vincent pointed out. At the same time, Vincent gave no hint of slowing the tight monetary policy pace.
According to market participants, there is a 64% probability of the Bank of Canada to tighten policy by the end of the year. The base interest rate was raised in July to a 22-year high of 5%.
The USDCAD currency pair shows a clear uptrend.
In terms of wave analysis, the price is in the formation of the third ascending wave on the H4 timeframe. The break through the top of the first wave at 1.3695 has already taken place. The upward movement may intensify in the near term.
Signal:
The short-term outlook for the USDCAD pair suggests buying.
The target is at the level of 1.3850.
Part of the profit should be taken near 1.3770.
The Stop-loss is set at 1.3625.
Bullish trend has a short-term character, so the trade volume should not be more than 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
