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09 Oct 2020
2 min read

USD/CAD Drops Further Ahead of Key Data

USD/CAD Drops Further Ahead of Key Data

*OspreyFX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions for more information.
Key Takeaways:
  • Anticipation for key economic statistics
  • Investors show confidence in anticipation of the stimulus package

The USD/CAD Downward Trend Persists

The USD/CAD is continuing its short-term downtrend and its currently trading at 1.3160, a drop of 260 pips since its last high of 1.3420 reached on Sep 30. The pair is now at a two-week low ahead of Canadian jobs data due later today.

The economic updates that are expected to create volatility will be Employment Change (Sep) and Unemployment Rate (Sep), scheduled for 12.30 GMT. The Employment Change for August saw a 245K increase while the expected change for September is 156K. The unemployment rate for August was 10.2%, and the expected for September is 9.7%.

If the September report shows the numbers expected or better, we will have a slow but steady pace of recovery that will be about 70% cumulative recovery, or approximately 2 million jobs, of the 3 million jobs lost in March and April.

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Bearish Moves for the US Dollar

On the USD side of the trade, we are witnessing a depreciation of the Greenback resulting in the pair losing value. Attributed to the US dollar bearish move is the hope for the additional stimulus package. The same hope is now driving the stock market higher as investors show confidence in a stable and continued recovery towards economic growth.

The technical levels of the USD/CAD indicate a return to a consolidation phase which has been well known by the pair between June 2018 and March 2020. During this period, the exchange rate was in the zone of 1.30 to 1.35.

The overvaluation of the pair this year was reached in the chaotic time in mid-March when the whole market was in panic mode as the COVID-19 crisis hit its peak. Ever since the USD/CAD reached a high of 1.4680 on Mar 18, it began to drop and is now back to pre-crisis levels, showing a balanced and healthy exchange rate. The lowest point reached since this yearโ€™s peak is 1.2980 which created a double bottom with the previously reached level of 1.2970 made on Jan 7 this year.