A push below 1.3720/35 targets a drop back to 1.3675 – Scotiabank

The Canadian dollar (CAD) is idling in a tight range, notes Shaun Osborne, chief foreign exchange strategist at Scotiabank.

It is slipping into a sideways trading range around 1.3725

“This morning’s Canadian jobs data is expected to show a rebound in hiring. Consensus expectation is for a gain of 25k after June’s 1.4k decline. The 6m moving average for job gains is 32k, while the 12m average is +39k, so there may be some risk of a slightly higher print. But the jobless rate is forecast to rise by a tenth to 6.5%, reflecting the expansion in the labor force, while hourly wage growth falls to 4.8% (from 5.6% in June).

“Policymakers are concerned that rising unemployment will hurt consumer activity and slow the economy in the coming months, and are adjusting interest rates accordingly. This appears to be a bullish view that is unlikely to be shaken by slightly better-than-expected data or today’s high wage growth. USDCAD is likely to remain well supported in 1.36s/minimum 1.37s for now.”

“Spot slipped into a sideways trading range around pullback support noted at 1.3725 (61.8% of 1.3598/1.3946 move up). Short-term momentum remains bearish against the USD, keeping risks tilted to the downside, but markets show no intention of pressing deeper on today’s 1.37s low. Resistance is 1.3775/90. A concerted push below 1.3720/35 targets a drop back to 1.3675.”