C$1.3945 was made short work of in April and retested as resistance in May, following a fourth consecutive month in the red. Technically speaking, the scope to explore deeper water is evident on the monthly scale until C$1.3534, followed by another layer of support from C$1.3242.
In view of this, as well as the lack of bullish intent evident from trendline support on the daily chart last week, extended from the low of C$1.2007, a breakout lower here could trigger further downside towards a daily support area between C$1.3550 and C$1.3601.
US Jobs Data in View
Amid a slowdown in soft US data, investors will closely monitor the US employment situation report for May for signs of cooling, which is released on Friday. As of writing, analysts are expecting the US economy to have added 130,000 new payrolls, marking a slowdown from April’s stronger-than-expected reading of 177,000. The unemployment rate is anticipated to remain at 4.2%, while wages are forecast to have risen by 0.3% month-on-month (from 0.2%) and to have ticked lower to 3.7% YY (from 3.8%).
If unemployment remains steady and wages rise, this reinforces a robust labour market and could be positive for the USD. However, should data come in weaker-than-expected, a USD selloff might be in the offing, as this could increase the odds of the Fed cutting rates at July’s meeting (currently 7 bps of easing priced in).
You may recall from the minutes of the Fed meeting that the central bank emphasised its ‘wait-and-see’ stance, and underscored that they remain ‘well-positioned to wait for more clarity on the outlook for inflation and economic activity’.
Additionally, as I noted in a post last week, Fed officials underscored that downside risks to employment and economic activity, as well as upside risks to inflation, have increased, primarily due to Trump’s tariff increases. I’ve also noted several times that this places the Fed in a challenging spot: they can either keep interest rates high to fight potential inflation or lower them to boost the economy. Markets expect the Fed to hold rates at its upcoming meeting this month, with investors looking to the September meeting for a 25 bp rate cut and a total of 50 bps of easing priced in for the year.
Ahead of Friday’s jobs report, several employment metrics are also making the airwaves this week. On Tuesday, April’s job openings figures land, shedding light on labour demand. Wednesday brings the ADP (Automatic Data Processing) private payrolls report for May, providing insights into private sector employment trends. Then, on Thursday, the latest weekly jobless claims will indicate movements in unemployment insurance applications – the latest print saw initial claims rise by 240,000 and continuing claims increase by 1.919 million, both of which were higher than expected.
