USD/CAD Pulls Back From Weekly Peak Ahead of Labor Data

Key Moments

USD/CAD Softens but Holds Near Recent Highs

The USD/CAD pair is modestly lower during Friday’s Asian session, halting a two-day winning streak. Despite the pullback, spot levels remain above the mid-1.3600 zone and close to a one-week high as market participants await key employment reports from both the United States and Canada.

Hopes for a potential US-Iran peace agreement are limiting demand for the safe-haven US Dollar (USD), restraining further upside in USD/CAD. At the same time, a renewed decline in Crude Oil prices is weighing on the commodity-linked Canadian Dollar (CAD), helping to cushion the downside in the pair. With these cross-currents in play, traders appear reluctant to take strong directional positions before the release of US Nonfarm Payrolls (NFP) and Canadian jobs figures.

Technical Picture: Bias Remains Constructive

From a technical standpoint, USD/CAD continues to show a short-term bullish tone. The pair is trading above the 100-period Simple Moving Average (SMA) and the 23.6% Fibonacci retracement of the recent decline from the March swing high. These levels are helping to underpin the current price action.

The Relative Strength Index (RSI) is hovering around 61, indicating positive momentum that has not yet reached overbought territory. The Moving Average Convergence Divergence (MACD) indicator is also holding in mildly positive territory. Together, these momentum gauges suggest that upward pressure could remain intact as long as nearby support holds.

Key Technical Levels

On the upside, the first notable resistance is located at the 38.2% Fibonacci retracement at 1.3708. Above that, additional resistance levels are seen at the 50.0% retracement at 1.3757 and the 61.8% retracement at 1.3807. A sustained move through these barriers would open the door toward the 78.6% retracement at 1.3876 and the cycle high region near 1.3965.

On the downside, immediate support is aligned at the 100-period SMA at 1.3653 and the 23.6% retracement level at 1.3648. A deeper correction would shift focus toward the structural base around 1.3550.

Focus on Canadian Labor Data: Unemployment Rate in View

Attention is also turning to upcoming Canadian labor statistics, particularly the Unemployment Rate published by Statistics Canada. This indicator measures the number of unemployed workers as a share of the total civilian labor force and is regarded as a leading gauge of labor market and economic conditions in Canada.

An increase in the Unemployment Rate typically signals weaker labor market dynamics and a softer Canadian economy, which is generally considered negative for the Canadian Dollar. Conversely, a decline in the rate is usually interpreted as supportive for the CAD.

The Unemployment Rate, released by Statistics Canada, is the number of unemployed workers divided by the total civilian labor force as a percentage. It is a leading indicator for the Canadian Economy. If the rate is up, it indicates a lack of expansion within the Canadian labor market and a weakening of the Canadian economy. Generally, a decrease of the figure is seen as bullish for the Canadian Dollar (CAD), while an increase is seen as bearish.