Following upbeat labor market data, the Canadian dollar stopped its permanent drop on buck-boosting rate-hike speculation and corrected as Statistics Canada released employment change for the month of March on Friday. Higher-than-expected figures boosted the national currency and led it back to C$1.2600 level.
On a monthly basis, employment in Canada, except for agricultural sector, rose by 28,700 new employees, while unemployment rate dropped to 6.8%, both positive for the economy, even more after previous oil price shock, hurting the oil exporting country. Participation rate strengthened as well to 65.9%.
Nevertheless, speculation on raising of US interest rates this yeat plays key role on this currency pair. Dollar has been strengthening after Federal Open Market Committee minutes from march meeting, showing only different opinion of policymakers on specific timing, albeit many of them still expect June's meeting to have at least rate-hike on the table. Friday's speech of Richmond Fed President Jeffrey Lacker supported this idea.
Whichever the meeting is going to lift rates for the first time since crisis began, speculation on earlier hike boosts the US currency and provides it strong position against most of its major counterparts, mostly dragged down by quantitative easing policies or plunge in oil prices.
From fundamental point of view, we remain now bullish on USD/CAD, with target set at C$1.2697.
From technical point of view, we expect the pair to correct mildly after data. Strong support is seen at C$1.2414, or milder one at C$1.2452. As for resistance, we see it at C$1.2640, already hit today, or later at C$1.2697, set as take profit price for bulls.
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