In Tuesday’s European session, the USD/CAD pair maintains a sideways trend around 1.3580. The Canadian dollar struggles to extend its recovery beyond this level as investors eagerly await fresh labor data from the United States to gauge the timing of potential interest rate adjustments by the Federal Reserve (Fed).
This week, market focus centers on the US Nonfarm Payrolls (NFP) report for March, scheduled for release on Friday. In today’s session, attention turns to the JOLTS Job Openings for February, with expectations that US employers will have posted approximately 8.74 million job openings, slightly lower than January’s figure of 8.863 million.
However, the prevailing market sentiment remains risk-off, influenced by robust US Manufacturing PMI data for March. The US Institute of Supply Management (ISM) reported a Manufacturing PMI above the 50.0 threshold at 50.3, signaling expansion after 16 consecutive months of contraction.
Reflecting this sentiment, S&P 500 futures have registered losses during the European session, while the US Dollar Index (DXY) hovers near a four-month high, slightly above 105.00.
The near-term direction of the Canadian dollar hinges on the forthcoming labor market data for March, set to be unveiled on Friday. Expectations suggest Canadian employers may have added 25,000 jobs.
Technically, the USD/CAD pair teeters on the brink of breaking out from the Ascending Triangle pattern observed on the daily timeframe. Such a breakout could occur in either direction, with the pattern displaying a notable volatility contraction. The upward-sloping border of the pattern originates from the low recorded on December 27 at 1.3177, while horizontal resistance stems from the high reached on December 7 at 1.3620.
Furthermore, the 20-day Exponential Moving Average (EMA) near 1.3520 acts as a point of contention for spot prices, indicating a sideways trend. The 14-period Relative Strength Index (RSI) oscillates within the 40.00-60.00 range, signaling indecision among market participants.
In the event of an upside breakout above the December 7 high at 1.3620, the USD/CAD pair could advance towards the high of May 26 at 1.3655, followed by the psychological resistance level of 1.3700. Conversely, a downside move below the low of February 22 at 1.3441 may expose the pair to the low of February 9 at 1.3413, with further downside potential towards the low of January 15 at 1.3382.
