USD/CAD snaps three-day winning streak below 21-day SMA ahead of US/Canada jobs data

USD/CAD remains on the back foot, within the 10-pip range, while trading around 1.3063 during the pre-European session on Friday. The quote earlier witnessed a pullback from 21-day SMA as the market’s await key statistics from the US and Canada for near-term direction.

Adding to the pair’s sluggish trading conditions were the mixed clues by the Bank of Canada (BOC) Governor Stephen Poloz. The Canadian central banker warned the audience in Vancouver about the risks of a return of "froth" to the housing sector. On the contrary, Mr. Poloz also mentioned that a combination of healthy employment and wage growth, and immigration-fuelled population growth is driving 'fundamental demand'.

On the geopolitical front, Canada is pushing hard to investigate matters concerning the Ukrainian flight crash that had few of its own citizens among 176 passengers who died. This increase the Canada-Iran tension but the US lawmakers’ push to tame President Donald Trump’s power to attack Tehran limits the risk tone. Further, uncertainty surrounding the US-China phase-two deal also weigh on the Canadian dollar (CAD).

With this, the US 10-year treasury yields stay mostly directionless around 1.86% while stocks in the Asia-Pacific region also flash mild gains.

Looking forward, traders will keep eyes on geopolitical/trade headlines while waiting for December month's employment data. Market forecasts suggest a likely improvement in Canadian Net Change in Employment and Unemployment Rate to confront expectedly weaker US Nonfarm Payrolls (NFP). With this, Westpac says, “There is plenty of room for a surprise as ever in the US employment report. Non-farm payrolls surged 266k in Nov, the strongest reading since Jan 2019, while the unemployment rate slipped back to 3.5%. The median forecast for NFP is 160k, with the +/- 1 standard deviation range 146k to 185k (Bloomberg survey). The unemployment rate is expected to hold at 3.5%, while average hourly earnings are seen up 0.3%mth, 3.1%yr. The post-GFC peak in wages growth was 3.4%yr in February 2019. Canada also releases Dec employment data, with consensus for a 25k rebound from the shock -71k in Nov, trimming the unemployment rate from 5.9% to 5.8%.”

Technical Analysis

21-day SMA level of 1.3082 offers immediate resistance ahead of December 18 low near 1.3105. Meanwhile, fresh selling pressure could be expected on the downside break of October low of 1.3042.