The U.S dollar rose against the Canadian dollar during last week’s trading session, but later eased off its gains on Friday against the broadly stronger U.S. dollar on Friday, boosted by small gains in oil prices and an unexpectedly strong domestic jobs report.
The Canadian dollar moved higher after Statistics Canada reported that the economy added 28,700 jobs in March. Economists had expected the employment level to remain unchanged. The unemployment rate was steady at 6.8%, in line with the consensus forecast.
The loonie was also boosted as oil prices rose on easing concerns that a nuclear deal with Iran would result in a ramp-up of Iranian crude exports into an already amply supplied market.
The loonie’s gains were however held in check as demand for the greenback continued to be underpinned by expectations for higher interest rates, as investors regained confidence that the U.S. economy would continue to recover after recent economic reports pointed to a slowdown at the start of the year.
The greenback received a boost earlier in the week after comments by the presidents of the New York and Richmond Federal Reserve banks made the case for the Fed to begin policy tightening as early as the summer.
Some investors had pushed back the timing of a rate hike until late 2015 after a surprisingly weak U.S. employment report for March.
USD/CAD remained bounded in range below 1.2834 resistance last week after the current bullish trend topped out and initial bias stays neutral this week first. Some more sideway trading could be seen. As long as 1.2351 support holds, the larger up trend is expected to continue and upside breakout is in favor. Above 1.2834 will target 1.3063 resistance. However, it should also be noted that break of 1.2351 will be a strong indication of medium term reversal and will trigger must deeper decline ahead.
In the week ahead, U.S. data on retail sales, inflation and consumer sentiment will be closely watched for further indications on the strength of the recovery. Wednesday’s monetary policy announcement by the Bank of Canada will also be in focus.