Current trend

The US dollar shows weak growth during the morning session, developing a relatively strong "bullish" momentum and updating two-month highs. At the moment, the USD/CAD pair is testing 1.3380 for a breakout, taking a lead from Friday's publications of reports on the US and Canadian labor markets.

US data recorded the emergence of only 187.0 thousand new jobs outside the agricultural sector after rising by 185.0 thousand in the previous month. In the meantime, the Average Hourly Earnings in July remained at the same level of 0.4% MoM and 4.4% YoY, while the market expected a slight slowdown of 0.3% MoM and 4.2% YoY, respectively, and the Unemployment Rate corrected from 3.6% to 3.5%. In turn, Canadian statistics indicated a decrease in the Employment Change in July by 6.4 thousand compared to an increase of 59.9 thousand a month earlier, while analysts expected the positive dynamics to continue at the level of 21.1 thousand. At the same time, the Average Hourly Wages increased by 5.0% year on year after increasing by 3.9% in the previous month, and the Unemployment Rate corrected from 5.4% to 5.5%, increasing the overall tension in the national labor market. Ivey Purchasing Managers Index fell from 50.2 points to 48.6 points in July against preliminary estimates of 52.7 points.

Meanwhile, according to a study by Bank of Canada officials, changes in corporate markups since the start of the COVID-19 pandemic have not had a significant impact on consumer price dynamics: the fastest dynamics was recorded in the manufacturing sector (22.0%), and the lowest in the agricultural sector (2.2%). After peaking at 8.1% in June last year, headline inflation eased to 2.8% in the previous month, falling within the regulator's target range of 1.0-3.0%, but food prices are holding at a high of 9.1% on an annualized basis. The researchers added that by 2022, when the rate reached its highest level in recent history, markup adjustments were close to zero or even negative.

Support and resistance

On the daily chart, Bollinger Bands are steadily growing. The price range is expanding but it fails to conform to the surge of "bullish" activity at the moment. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic, having reached its highs, reversed into a horizontal plane, indicating overbought American currency in the ultra-short term.

Resistance levels: 1.3400, 1.3450, 1.3500, 1.3550.

Support levels: 1.3350, 1.3300, 1.3250, 1.3224.

Trading tips

Long positions can be opened after a breakout of 1.3400 with the target of 1.3500. Stop-loss — 1.3350. Implementation time: 2-3 days.

A rebound from the level of 1.3400 followed by a breakdown of 1.3350 may be a signal to open short positions with the target at 1.3250. Stop-loss — 1.3400.