USD/CAD rises to highs since early July amid USD strength

USD/CAD rose near 1.3340, displaying more than 0.40% gains on the day.
ADP showed that the US created more jobs than expected in July.
Dropping Oil prices and a negative market sentiment also contribute to the upwards momentum.

On Wednesday’s session, the USD/CAD rose for a second consecutive day, near 1.3340. A stronger Dollar amid hot labour market data from the US and lower Oil prices are the main responsible for the CAD’s weakness.

The US created more jobs than expected in July

The number of employed people in the US was 324,000 in July, according to Automatic Data Processing Inc. (ADP), which was higher than the 189,000 expectations but lower than the revised figure of 455,000 in June. Despite decelerating from its previous reading, it may suggest to the Federal Reserve (Fed) that the sector is still tight and may contribute to inflationary pressures via rising wages. That said, investors will closely look at Nonfarm Payrolls and Average Hourly Earnings data on Friday.

Reacting to the data, the USD strengthened as US yields rose and Wall St indexes dropped. The 2-year yield rose to 4.93% while the S&P 500 (SPX) declined by 1.23% as well as the Dow Jones and the Nasdaq Composite, which are seeing losses of 0.76% and 1.84%, respectively.

In that sense, investors may place bets on a more aggressive Fed. Still, as Chair Powell stated, monetary policy decisions will depend on data, so the labour market on Thursday and Friday will dictate the pace of the markets.

USD/CAD Levels to watch

From a technical standpoint, the USD/CAD maintains a bullish outlook for the short term, as observed on the daily chart. The Relative Strength Index (RSI) is comfortably positioned in the positive territory above its midline. It has a northward slope, complemented by a positive signal from the Moving Average Convergence Divergence (MACD), showing green bars, signalling a growing bullish momentum. Additionally, the pair is above the 20-day Simple Moving Average (SMA) but below the 100 and 200-day SMAs, suggesting that despite the recent bearish sentiment, the bulls are still resilient, holding some momentum.

Resistance levels: 1.3385 (July’s high), 1.3407 (100-day SMA), 1.3455 (200-day SMA).
Support levels: 1.3280, 1.3250, 1.3240.