The USD/CAD pair is hovering near its highest level this year as investors wait for the upcoming US and Canadian jobs data. It is trading at 1.2828, which is slightly below the year-to-date high of 1.2915. The pair has risen by 3.45% above the lowest level this year.
US and Canada jobs data
A major theme in the market this week is about the strength of the US dollar. The currency has jumped to the highest level in about 20 years, leading to a sharp decline of other currencies.
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The strength of the US dollar accelerated after the Federal Reserve concluded its two-day meeting on Thursday. In this meeting, the bank decided to hike interest rates by 0.50%, meaning that it has added them by 0.75% this year.
The bank also committed to continuing its tightening process. It will now deliver several 0.50% rate hikes this year and start winding down its asset purchases. Therefore, investors believe that this shift in tone will push the US dollar sharply higher.
The next key catalyst for the USD/CAD pair will be the upcoming non-farm payroll data that are scheduled for Friday afternoon. Analysts expect these numbers to show that the economy added 391k jobs in April after it added more than 431k in the previous month.
At the same time, the numbers are expected to reveal that the unemployment rate declined to 3.5% while the participation rate rose to 62.4%. Extremely strong jobs numbers will provide the Fed with more incentives to hike interest rates.
The USD/CAD will also react to the latest Canadian jobs numbers. Analysts believe that the Canadian economy continued adding more jobs in April. The expected addition is that the country added over 50k jobs as the unemployment rate dropped to 5.2%.
USD/CAD forecast
The four-hour chart shows that the USD/CAD pair has been in a strong bullish trend in the past few weeks. It has risen by more than 3.50% from its lowest level in April. It has also moved slightly above the 25-day and 50-day moving averages, signaling that bulls are in control. The pair has also formed a cup and handle pattern.
In price action analysis, a cup and handle pattern is usually a bullish sign. Therefore, there is a likelihood that it will have a bullish breakout.
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Source: https://invezz.com/news/2022/05/06/usd-cad-forecast-ahead-of-canada-and-us-nfp-data/