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Thanks to a lack of market-moving headlines and caution ahead of the U.S. NFP release, volatility was limited for most of the major currencies.

Will Canada and the U.S.’ labor market reports inspire enough volatility to extend USD/CAD’s downtrend?

Before you check out the setup, take a quick look at the top headlines during the Asian session:

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Upcoming Potential Catalysts on the Economic Calendar:

  • Germany’s factory orders at 6:00 am GMT
  • U.K.’s construction PMI at 8:30 am GMT
  • U.S. NFP report at 12:30 pm GMT
  • Canada’s labor market numbers at 12:30 pm GMT
  • Canada’s IVEY PMI at 2:00 pm GMT

What to Watch: USD/CAD

USD/CAD 1-hour Forex Chart
USD/CAD 1-hour Forex Chart

USD/CAD is having trouble staying above its 1.3150 weekly highs. And why not?

As you can see, the minor psychological level lines up with a 61.8% Fib retracement AND a descending trend line that hasn’t been broken since late July. Heck, it’s even a hair’s breadth away from the 200 SMA on the 1-hour time frame!

The consolidation could take an interesting turn when the U.S. and Canada both print their labor market numbers for the month of August.

The U.S. is said to have created around 1.4M jobs for the month, lower than its 1.7M increase in July. Meanwhile, analysts see another 330,000 workers finding jobs in Canada.

And then there’s the overall U.S. dollar demand, which has been limited by the Fed signaling a loooong period of low interest rates and traders expecting lockdown measures to limit Uncle Sam’s recovery for a while yet.

If today’s reports translate to an anti-dollar vibe, then USD/CAD could turn from the trend line resistance and revisit the 1.3050 levels closer to the 100 SMA.

If the U.S. NFP report prints strong numbers as the leading indicators suggest, however, then USD/CAD just might break above the trend line and test areas of interest near 1.3200 or 1.3240.