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Canadian Dollar is having a notable uplift in early US session, propelled by stronger than expected employment data that underscores a persistently robust and tight labor market scenario in the country. The revelations from the data could potentially pose hurdles in the path of Canada's disinflation journey, a process which, according to BoC governor Tiff Macklem, has already slowed. Despite BoC's decision to maintain rates unchanged earlier this week, the potential for future hikes remains, especially if the tight labor market persists and threatens the disinflation progress.

While Canadian Dollar displayed strength, US Dollar seemed to be retracting some of its recent gains, landing it among the day's underperformers. This setback for the greenback is potentially a mere digestion of its near-term ascents. Yen, after momentarily benefiting from Japan's verbal interventions, also showed signs of softening. Across the Atlantic, Euro recorded modest declines against its European counterparts. This slip can be attributed to anticipations of economic contraction in Germany - the Eurozone's economic powerhouse - this year, as forecasted by a leading German research institute.

Technically, EUR/CAD's fall from 1.4822 resumes after the Canadian job release. This decline is seen as the third leg of the consolidation pattern from 1.4879. Deeper fall is expected as long as 1.4661 resistance holds, to 1.4482 support, or further to 100% projection of 1.4879 to 1.4482 from 1.4822 at 1.4425.

In Europe, at the time of writing, FTSE is up 0.11%. DAX is down -0.07%. CAC is up 0.34%. Germany 10-yaer yield is down -0.0005 at 2.611. Earlier in Asia, Nikkei dropped -1.16%. China Shanghai SSE dropped -0.18%. Singapore Strait Times dropped -0.58%. Japan 10-year JGB yield dropped -0.0071 to 0.651.

Canada employment grew 39.9 in Aug, unemployment rate steady at 5.5%

Canada employment grew 39.9k in August, well above expectation of 20.0k. Unemployment rate was unchanged at 5.5%, below expectation of 5.6%, stabilized after three consecutive monthly increases. Employment rate fell -0.1% to 61.9%.

Average hourly wages rose 4.9% yoy, down from July's 5.0% yoy. Total hours worked rose 0.5% mom, 2.6% yoy.

Germany poised for mild economic contraction in 2023, DIW reports

Germany stands on the brink of being the only major economy to register a contraction in 2023, with German economic research institute, DIW, projecting a -0.4% dip in the nation's economic output for the year. This downturn is primarily attributed to sluggish domestic consumption and a falter in export dynamics, exacerbated by a slowed Chinese economy.

Looking forward, however, the institute holds a more positive outlook, forecasting a steady 1.2% growth in both 2024 and 2025. Geraldine Dany-Knedlik, the co-head of forecasting and economic policy at DIW, envisages that a pronounced increase in wages and salaries would spur household expenditure, kickstarting a recovery phase.

Timm Bönke, also a co-head at the DIW's forecasting department, anticipates a notable improvement in the consumer sentiment owing to a substantial dip in inflation rates in the forthcoming period. Households will be encouraged to enhance their spending, propelled by improved financial conditions and a potentially steadier inflation environment.

Japan cash earnings growth slows to 1.3% yoy, real wages down for 16th month

In July, Japan experienced slowdown in growth of labor cash earnings, recording increase of 1.3% yoy, a figure notably below expectation of 2.4% yoy. This decline comes in the wake of a 2.3% yoy surge in June and a 2.9% yoy hike in May.

Drilling down into the details, while the base annual salary grew 1.6% yoy, outpacing June's 1.3% yoy rise, overtime pay experienced a reduced uplift of 0.5% yoy, a significant deceleration from the 1.9% yoy in June.

One of the more concerning revelations is the continued drop in real wages, which adjusted for inflation, decreased by -2.5% yoy, a deepening from June's -1.6% yoy decline. This marks the 16th consecutive month of falling real wages, spotlighting inability of salaries to keep pace with escalating prices, thereby exacerbating the financial strain on households.

Corroborating this trend is separate data published earlier this week which highlighted a pronounced drop in household spending in July, plummeting -5.0% yoy, marking its most substantial decline in close to two and a half years.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.3648; (P) 1.3671; (R1) 1.3711; More....

Intraday bias in USD/CAD is turned neutral with today's retreat, and some consolidations could be seen below 1.3693. But the favored case is still that correction from 1.3976 has completed at 1.3091. Further rally is expected as long as 1.3488 support holds. Above 1.3693 will resume the rally from 1.3091 to 1.3860 resistance, and then 1.3976 high.

In the bigger picture, price actions from 1.3976 are viewed as a corrective pattern only. Upon completion, rise from 1.2005 (2021 low) would resume through 1.3976. Next target is 61.8% projection of 1.2005 to 1.3976 from 1.3091 at 1.4309. For now, this will remain the favored case as long as 55 D EMA (now at 1.3436) holds.

Economic Indicators Update

Canada employment grew 39.9k in August, well above expectation of 20.0k. Unemployment rate was unchanged at 5.5%, below expectation of 5.6%, stabilized after three consecutive monthly increases. Employment rate fell -0.1% to 61.9%.

Average hourly wages rose 4.9% yoy, down from July's 5.0% yoy. Total hours worked rose 0.5% mom, 2.6% yoy.

Full Canada employment release here.

GBPUSD is taking a breather at 1.2500 zone as larger bears face headwinds on approach to pivotal 200DMA support (1.2425).

Bounce from Thursday’s new multi-week low (1.2445) was so far limited and unable to sustain gains above 1.2500 mark, suggesting that bears hold grip.

Weekly close below cracked 100WMA (1.2521) will deliver initial bearish signal, with close below 1.2482 (Fibo 23.6% of 1.0348/1.3141) to strengthen bearish structure for break through 200DMA, which would spark fresh acceleration and expose next key support at 1.2307 (May 25 trough).

BOE Governor Bailey said that the central bank is much nearer to the top of its tightening cycle, although with possibility further hikes if inflation remains stubbornly high, adds to pound’s growing negative sentiment.

Near-term action is expected to remain biased lower while capped by falling 10DMA (1.2586).

Res: 1.2482; 1.2500; 1.2521; 1.2586.
Sup: 1.2445; 1.2425; 1.2368; 1.2307.

AUD/USD declined 0.6400 before the bulls appeared. NZD/USD is now attempting a fresh increase from the 0.5860 support zone.

Important Takeaways for AUD/USD and NZD/USD Analysis Today

• The Aussie Dollar started a fresh decline from well above the 0.6440 level against the US Dollar.
• There is a key contracting triangle forming with resistance near 0.6400 on the hourly chart of AUD/USD at FXOpen.
• NZD/USD declined heavily from the 0.6000 resistance zone.
• Recently, there was a break above a connecting bearish trend line with resistance near 0.5880 on the hourly chart of NZD/USD at FXOpen.

AUD/USD Technical Analysis

On the hourly chart of AUD/USD at FXOpen, the pair struggled to clear the 0.6520 zone. The Aussie Dollar started a fresh decline below the 0.6440 support against the US Dollar.

The pair even settled below 0.6400 and the 50-hour simple moving average. Finally, the bulls appeared near the 0.6360 zone. A low was formed near 0.6357 and the pair is now consolidating losses. It is slowly moving higher above the 50-hour simple moving average.

On the upside, an immediate resistance is near a key contracting triangle at 0.6400. It is close to the 23.6% Fib retracement level of the downward move from the 0.6522 swing high to the 0.6357 low.

A clear upside break above 0.6400 could send the pair toward the 50% Fib retracement level of the downward move from the 0.6522 swing high to the 0.6357 low at 0.6440. The next major resistance is near 0.6485, above which the price could rise toward 0.6520. Any more gains might send the pair toward 0.6550.

A close above the 0.6550 level could start another steady increase in the near term. The next major resistance on the AUD/USD chart could be 0.6600.

On the downside, initial support is near the 50-hour simple moving average at 0.6385. The next support could be the 0.6360. Any more losses might send the pair toward the 0.6320 support.

NZD/USD Technical Analysis

On the hourly chart of NZD/USD on FXOpen, the pair also followed a similar pattern and declined from the 0.6000 zone. The New Zealand Dollar gained bearish momentum and traded below 0.5935 against the US Dollar.

The pair even spiked below the 50-hour simple moving average and tested 0.5860. A low was formed near 0.5859 and the pair is now attempting a fresh increase. It is back above the 0.5880 level and the 50-hour simple moving average.

It is now struggling to clear the 23.6% Fib retracement level of the downward move from the 0.6014 swing high to the 0.5859 low at 0.5900. If there is a move above 0.5900, the pair could rise toward the 0.5935 resistance.

The 50% Fib retracement level of the downward move from the 0.6014 swing high to the 0.5859 low is also at 0.5935, above which the pair could rise toward 0.5985. Any more gains might open the doors for a move toward the 0.6000 resistance zone.

On the downside, immediate support on the NZD/USD chart is near the 50-hour simple moving average at 0.5880. The next major support is near the 0.5860 zone. If there is a downside break below 0.5860, the pair could extend its decline toward the 0.5820 level. The next key support is near 0.5800.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

The price of the main cryptocurrency rose above the level of 26k US dollars. This was fueled by the news that Ark Invest and 21Shares filed applications with the US Securities and Exchange Commission (SEC) for a spot ETF on Ethereum.

Some say recent verdicts in favor of cryptocurrency firms Grayscale and Ripple Labs in lawsuits against the SEC increase the chances that ETF applications for Ethereum will be approved. We also note that applications for bitcoin ETFs from BlackRock and other funds are being reviewed by the SEC, but the deadlines for these applications, originally set for early September, have been postponed to a later date.

Meanwhile, Barrons writes that the NASDAQ exchange is preparing infrastructure for cryptocurrency trading, which is causing bullish sentiment among cryptocurrency enthusiasts. But the BTC/USD chart gives reason to doubt.

Bearish arguments:

→ The price of bitcoin did not exceed 50% of the sharp decline in late August and early September.

→ The price of bitcoin has not reached the target, which is built after the breakout based on the height of the previous consolidation zone (on the chart it is 25,500-26,000).

→ Long upper shadows have formed on the last candles, indicating the strength of offers above the 26k level.

It is reasonable to assume that future bid approvals will generate strong bullish momentum. The rally could also be caused by the hype around the halving and the easing of the Fed’s policy in 2024. But so far there are no strong drivers for growth, and, according to Coindesk data, the volume of spot cryptocurrency trading in August set a minimum for more than 4.5 years.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

• Canada expected to have shed 6,400 jobs
• BoC’s Macklem says rate increases may be needed to lower inflation

The Canadian dollar is steady on Friday in what should be a busy day. In the European session, USD/CAD is trading at 1.3670, down 0.12%. Canada releases the August job report later today, with the markets braced for a decrease of 6,400 in employment.

The US dollar has been on a tear against the major currencies since mid-July. The Canadian dollar has slumped, losing about 450 basis points during that span. The Canadian economy hasn’t been able to keep pace with its southern neighbor, and that was made painfully clear as GDP contracted by 0.2% in the second quarter, below expectations.

The deterioration in economic growth is a result of a weak global economy as well as the Bank of Canada’s steep tightening cycle. After back-t0-back increases, the BoC opted to pause at this week’s meeting and held the benchmark cash rate at 5.0%. Governor Macklem likes to use the term “conditional pause”, which means that a break from rate hikes will depend on economic growth and inflation levels.

At this week’s meeting, the BoC’s rate statement was hawkish, warning that inflation was too high and not falling fast enough. This was a signal that the door remained open to interest rate increases. Macklem was more explicit on Thursday, stating that further rate hikes might be needed to lower inflation and warning that persistently high inflation would be worse than high borrowing costs.

The markets are more dovish about the BoC’s rate path, given that the economy is cooling and the central bank will be wary about too much tightening which could tip the economy into a recession. The markets have priced in a 14% probability of a rate hike at the October meeting.

USD/CAD Technical

• USD/CAD is testing resistance at 1.3657. The next resistance line is 1.3721
• 1.3573 and 1.3509 are providing support

USDCAD bulls have been in charge for eight weeks in a row, currently aiming to push past the resistance trendline from 2020 that caused a bearish trend reversal in October 2022 and March 2023.

Given the overbought signals coming from the RSI and the stochastic oscillator, it’s uncertain whether the pair will manage to extend its uptrend above the tough trendline and the 1.3740 bar. The 78.6% Fibonacci mark of the 1.3976-1.3115 downtrend is nearby at 1.3780 and may attract some interest before all eyes turn to the 2023 peak of 1.3860. If the rally continues from there, the next target could be the 2022 top of 1.3976.

Should the bears take over below the 61.8% Fibonacci of 1.3640, the price could head for the 20-day simple moving average (SMA) at 1.3570. Slightly lower, the 1.3500 area might also provide some footing ahead of the flattening 200-day SMA at 1.3460.

In brief, USDCAD is maintaining a clear uptrend, but the risk of a downside reversal is increasing as the price is quickly approaching a critical resistance area. 

Germany stands on the brink of being the only major economy to register a contraction in 2023, with German economic research institute, DIW, projecting a -0.4% dip in the nation's economic output for the year. This downturn is primarily attributed to sluggish domestic consumption and a falter in export dynamics, exacerbated by a slowed Chinese economy.

Looking forward, however, the institute holds a more positive outlook, forecasting a steady 1.2% growth in both 2024 and 2025. Geraldine Dany-Knedlik, the co-head of forecasting and economic policy at DIW, envisages that a pronounced increase in wages and salaries would spur household expenditure, kickstarting a recovery phase.

Timm Bönke, also a co-head at the DIW's forecasting department, anticipates a notable improvement in the consumer sentiment owing to a substantial dip in inflation rates in the forthcoming period. Households will be encouraged to enhance their spending, propelled by improved financial conditions and a potentially steadier inflation environment.

Full DIW release here.

Why is the yuan falling?

→ Strong US dollar. Yesterday it became known that the number of applications for unemployment benefits in the US amounted to 216k for the week — below the forecast of 232k applications. This is the lowest level since February.

→ Worsening problems in the Chinese economy. Yesterday's data from the General Administration of Customs of the People's Republic of China showed that the volume of exports in August decreased by 8.8% in annual terms — the decline in exports is recorded for the fourth month in a row.

As the chart shows, the USD/CNH rate reached 7.36 today. According to some sources, this is not only the minimum for the yuan for 2023, but also the minimum for 16 years (it depends on whether the 2022 low is considered broken).

Bullish arguments:

→ The price is within the ascending channel. The dynamics develop in its upper part, which indicates the strength of the trend.

→ The price fell below 7.27 only for 1 day, forming a candle with a long lower shadow. The recovery occurred quickly, indicating the strength of demand.

→ The size of the B-C retracement corresponds to the size of 50% of the A-B impulse. This is the proportion for a normal correction within a stable trend.

→ 3 candles on September 5-7 can be classified as a bullish 3 White Soldiers pattern. Statistically, after the formation of the pattern, we should expect continued growth.

Bearish arguments:

→ If the trend continues, the rate may reach the upper boundary of the upper channel. There, the bulls can take profits, which will weaken the trend.

→ The FT reports the words of Ken Cheng, chief FX strategist for Asia at Mizuho Bank: “there is a growing likelihood that the People's Bank of China will adjust the currency band.” That is, as in the case of the yen, one should be prepared for government intervention in order to protect the currency.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

EURUSD is consolidating just above pivotal Fibo support at 1.0695 (76.4% of 1.0516/1.1275) in early Friday, as larger bears found temporary footstep here.

The pair is on track for the eight consecutive weekly close in red which reinforces overall bearish structure.

Daily chart shows 14-d momentum deeply in negative territory and moving averages in full bearish setup (double death cross of 5/200 and 10/200DMA have been formed), though oversold stochastic warns that bears may take a breather.

Partial profit-taking at the end of the week may also contribute to expected near-term scenario.

Persisting strong downside pressure suggests that consolidation should be limited and offer better selling opportunities.

Upticks should be capped under 1.0800 zone (falling 10DMA / broken Fibo 61.8%) to keep bears intact and offer better opportunities to re-enter bearish market.

Firm break of 1.0700/ 1.0695 (psychological/Fibo) to generate fresh bearish signal for extension towards 1.0635/11 (May 31 low/Fibo 38.2% of entire Sep 22/July 23 rally from 1.0935 to 1.1275).

Res: 1.0766; 1.0789; 1.0806; 1.0822.
Sup: 1.0695; 1.0667; 1.0635; 1.0611.