USD/CAD prods three-day rebound below 1.3500 ahead of US NFP

• USD/CAD struggles for clear directions amid Good Friday holiday, pauses three-day uptrend.
• Strong Canada jobs report contrast with downbeat US data to challenge Loonie pair buyers.
• WTI crude oil price grinds higher and challenge the USD/CAD bulls.
• Recession woes, BoC’s dovish bias keeps Loonie buyers hopeful ahead of US Employment report for March.

USD/CAD pares weekly gains around 1.3490 as traders seek more clues amid a sluggish session on the early Good Friday holiday. Adding strength to the market’s inaction could be the cautious mood ahead of the US employment data for March.

The Loonie pair rose in the last three consecutive days despite firmer Canada statistics and upbeat prices of the WTI crude oil, Ontario’s main export earner. The reason could be linked to the Bank of Canada’s (BoC) dovish bias and the looming recession woes, backed by the downbeat US data.

On Thursday, Canada’s headline Net Change in Employment rose to 34.7K in March from 21.8K prior, versus 12K market consensus, whereas the Unemployment Rate reprinted 5.0% figure compared to analysts’ estimate of 5.1%. It’s worth noting, however, that the Participation Rate eased to 65.6% during the stated month from 65.7% expected and prior. Further, the Average Hourly Wages eased to 5.2% YoY in March versus 5.4% previous reading. On a different page, Canadian Ivey Purchasing Managers Index improved to 58.2 seasonally adjusted for March versus 56.1 expected and 51.6 prior.

On the other hand, US Initial Jobless Claims improved to 228K for the week ended on March 31 versus 200K expected and upwardly revised 246K prior. It’s worth noting that the Challenger Job Cuts for the said month rose to 89.703K from 77.77K prior. Previously, US JOLTS Job Openings dropped to the 19-month low in February while the ADP Employment Change for March also disappointed markets with 145K figures. Further, the US ISM Services PMI for March also amplified pessimism as it dropped to 51.2 versus 54.5 expected and 55.1 prior.

It should be noted that the downbeat US data pushed the Federal Reserve’s (Fed) preferred gauge of economic health towards drumming recession woes, which in turn lures the USD/CAD buyers, despite the latest inaction. “Research from the Fed has argued that the ‘near-term forward spread’ comparing the forward rate on Treasury bills 18 months from now with the current yield on a three-month Treasury bill was the most reliable bond market signal of an imminent economic contraction,” per Reuters.

Elsewhere, WTI crude oil eyes the third consecutive weekly gain, around $80.50 at the latest, amid fears of supply cuts and hopes of more demand from China.

To sum up, USD/CAD bears the burden of upbeat Canada data and firmer Oil prices but the recession woes and pre-NFP consolidation tests traders of late.

Also read: Nonfarm Payrolls Preview: Markets fear depressing data, three scenarios for the US Dollar

Technical analysis

Although an eight-month-old ascending support line restricts the immediate downside of the USD/CAD pair to around 1.3425, the bulls need validation from the 100-DMA hurdle of near 1.3530 to keep the reins.