USDCAD will rebound from lower limit of sideways trend to 1.443 level

The USDCAD currency pair is consolidating sideways after reaching the four-year high in mid-December. The quotes have been moving in the 1.433–1.443 range for a month and are approaching its lower limit. Another price rebound is quite possible, after which the price will head towards the level of 1.443. The current economic data is still not enough for USDCAD to exit the sideways trend. 

Friday’s labor market reports for December were positive for both the US and Canada. The number of new jobs in Canada exceeded analysts' forecast by more than three times (90.9 thousand compared to 24.9 thousand). The unemployment rate fell to 6.7% despite the expected growth to 6.9%. However, these results may be ad hoc and do not guarantee a significant improvement in the Canadian labor market in the near future.

Macquarie experts suggest treating the latest statistics with some skepticism. According to their analysis, the number of the employees in Canadian economy increased mostly due to people aged 55 and older. This spike could be caused by seasonal hiring for the holiday period. In the future, this factor will cease to have a major impact on the labor market, which risks weakening further. 

Bloomberg analysts highlight the absence of noticeable increase in Canadian bond yields despite the positive economic data. The 10-year yield remains below 3.5%, while yields on 10-year US bonds are close to 5%. Jason Daw of RBC Capital Markets believes that the main reason for this divergence is concerns that Donald Trump will impose tariffs on Canadian goods import to the United States. It will weaken the Canadian economy and put pressure on the national currency. 

Unless the USDCAD pair quotes are secured below 1.43, the main scenario is still a rebound towards the level of 1.443. 

Consider the following trading strategy:

Buy USDCAD at the current price. Take profit – 1.443. Stop loss – 1.43.