Canadian dollar edges lower ahead of NFP

The Canadian dollar has posted slight losses on Friday. In the North American session, USD/CAD is trading at 1.2408, down 0.17% on the day. The US dollar is on an upswing and USD/CAD has gained 0.95%, as the pair has erased most of the losses from a week earlier.

Canada’s manufacturing sector has been a bright spot, as it has expanded 11 straight months. Manufacturing PMI is expected to rise to 57.4 in June, up from 57.0. A reading of over the 50-level indicates growth.

Canada’s GDP for April contracted, but the drop was not as sharp as anticipated. The decline of -0.3% was ahead of the flash estimate of -0.8%. The vaccine rollout, which has lagged behind most major economies, is accelerating and this should allow for a further reopening of the economy. According to a Scotiabank forecast, growth is expected to recover to pre-Covid levels in the third quarter of 2021 and should continue moving upwards into 2022.

US Nonfarm Payrolls expected to accelerate

The markets are focused on the June US employment report. Nonfarm payrolls are projected to rise to 700 thousand, compared to the May reading of 559 thousand. Still, investors are being cautious, as NFP has underperformed in the past two releases.

Another employment indicator that could be a market-mover today is US wage growth. The estimate for June YoY is a strong gain of 3.7%, compared to the May reading of just 2.0%. With many jobs lying vacant, employers have raised wages in hopes of luring workers to fill jobs. If wages jump sharply, we could see upcoming inflation numbers also rise, which is sure to get the attention of the Federal Reserve.

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       USD/CAD Technical

• There is weak resistance at 1.2440, followed by resistance at 1.2580
• On the downside, there is a monthly support level at 1.2206. Below, there is support at 1.2202

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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