USD/CAD attracted some buying and refreshed daily high during the early North American session.
Expectations for a further tightening by the Fed acted as a tailwind for the USD and extended support.
The mixed US/Canadian employment data did little to provide any meaningful impetus to the major.
An uptick in crude oil prices underpinned the loonie and held back USD/CAD bulls from placing aggressive bets.
The USD/CAD pair quickly reversed an early North American session dip and jumped to a fresh daily high, around the 1.2875 region post-US/Canadian monthly jobs report.
The headline NFP print showed that the US economy added 428K new jobs in April as compared to the 391K anticipated. This, however, was offset by a slight disappointment from the unemployment rate, which held steady at 3.6% against a downtick to 3.5% anticipated. Moreover, Average Hourly Earnings also missed market expectations and rose 0.3% MoM in April.
The mixed US employment data did little to provide any impetus, though expectations that the Fed would need to take more drastic action to bring inflation under control acted as a tailwind for the buck. In fact, the markets are still pricing in a further 200 bps rate hike for the rest of 2022, which was evident from a fresh leg up in the US Treasury bond yields.
Apart from this, a generally weaker tone around the equity markets further drove haven flows towards the greenback. This, along with a rather unimpressive Canadian employment data, acted as a tailwind for the USD/CAD pair. Statistics Canada reported that the number of employed people rose by 15.3K in April, as against 55K anticipated, and the jobless rate edged down to 5.2%.
This, however, was offset by modest uptick in crude oil prices, which extended some support to the commodity-linked loonie and kept a lid on any further gains for the USD/CAD pair. Hence, it will be prudent to wait for some follow-through buying before traders start positioning for an extension of the recent appreciating move witnessed over the past two weeks or so.
Technical levels to watch
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