Canada’s July employment data to rock the Loonie

The USD seems about to end the week in the reds, as it edged lower against its counterparts yesterday. Trump’s temporary choice, Stephen Miran, to fill in Kugler’s position in the Fed seems to disappoint the markets. In any case, we expect Miran, should he be approved by the Senate, to advocate for a more dovish monetary policy by the Fed, adhering to US President Trump’s wishes. It’s characteristic that Miran had advocated for a tighter control of the Fed by the US President. Overall, the appointment seems to be tilting the balance of power within the Fed to the dovish side and thus may continue weighing on the USD on a monetary level.

North of the US border, Canada’s employment data for July are to be released and could shake the Loonie. Forecasts are for the unemployment rate to tick up to 7.0% and the employment change figure to drop from June’s stellar 83.1k to 13.5k, with the prognosis of the two indicators aligning in pointing towards a looser Canadian employment market for the past month. Should the actual rates and figures be even worse, we may see the Loonie slipping as pressure on the BoC to ease its monetary policy could mount. Should actual data show that the Canadian employment market eased less than expected, we may see the CAD edging higher, while a tightening Canadian employment market may provide asymmetric support for the Loonie.

USD/CAD continued to edge lower after breaking the 1.3770 (R1) support line, now turned to resistance. Despite the slight bearish tendencies characterising the pair’s movement over the past few days we may see USD/CAD stabilizing, entering a sideways motion, as the RSI indicator remains close to the reading of 50, implying a rather indecisive market. Should the bulls take over, we may see the pair breaking the 1.3770 (R1) resistance lien and start aiming for the 1.3905 (R2) resistance level. Should the bears be in charge of the pair’s direction, we may see the pair nearing if not breaching the 1.3550 (S1) support level.

Across the pond, GBP got some support yesterday as BoE released its interest rate decision. The bank as was widely expected cut rates by 25 basis points, yet necessitated a second vote to reach a decision. The release highlighted also the hesitation of various MPC members as out of nine members of the Committee four favored the bank to remain on hold. We note that after the release, the market’s expectations for the bank’s rate cutting path shifted, as a November cut was expected before the release while afterwards that rate cut was expected in December. There is “genuine uncertainty” for the bank’s path with inflationary pressures being the main determinant, yet currently we see the pound being supported on a monetary level.

GBP/USD edged higher yesterday testing the 1.3435 (R1) resistance line yet failed to break it and corrected lower in today’s Asian session. The pair seems to be in a make or break position caught between conflicting trendlines. The RSI indicator has reached the reading of 50, implying a lack of direction from the market sentiment. For the time being we expect the pair to stabilise yet not for long. A bullish outlook could emerge should cable be able to break the 1.3435 (R1) resistance line and start actively aiming for the 1.3640 (R2) resistance level. For a continuance of the bearish outlook we would require the pair to reverse the gains made over the past four days and continue to break the 1.3205 (S1) support line thus opening the gates for the 1.3010 (S2) support base.

Other highlights for the day:

Today we get the Czech Republic’s CPI rates for July, while on a monetary level, we not the speeches of BoE Chief Economist Hugh Pill and St. Louis Fed President Musalem. On Saturday, we note the release of China’s July CPI rates.

USD/CAD Cash Daily Chart

• Support: 1.3550 (S1), 1.3420 (S2), 1.3285 (S3)
• Resistance: 1.3770 (R1), 1.3905 (R2), 1.4020 (R3)

GBP/USD Daily Chart

• Support: 1.3205 (S1), 1.3010 (S2), 1.2805 (S3)
• Resistance: 1.3435 (R1), 1.3640 (R2), 1.3835 (R3)

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