■ Canadian unemployment expected to tick upward to 5.8%, potentially weakening CAD support.
■ US job creation forecasts suggest cooling labor market with 200K NFP estimate.
The USDCAD currency pair maintains its bearish trajectory during Friday's Asian session, marking its third consecutive decline as the exchange rate tests support near 1.3450. Market participants remain cautious ahead of Statistics Canada's employment report, which could provide fresh directional catalysts. Economists project the unemployment rate may edge up to 5.8% from January's 5.7% reading, while net employment change is expected to show 20K new positions versus the previous 37.3K.
Elevated crude oil prices continue serving as a tailwind for the commodity-linked Canadian dollar, with WTI futures holding near $78.90 per barrel. This persistent energy market strength creates fundamental support for CAD while simultaneously pressuring the USDCAD cross. The correlation between hydrocarbon prices and Canada's currency remains particularly strong given the nation's status as a major energy exporter.
Financial analysts at ING emphasize the ongoing sensitivity of CAD to US economic indicators and the synchronized monetary policy expectations between the Federal Reserve and Bank of Canada. Their research suggests limited potential for dramatic USDCAD movements in the current environment, with both central banks likely to maintain coordinated policy approaches in the near term.
The US Dollar Index (DXY) shows tentative signs of stabilization around 102.80 ahead of critical labor market releases. Recent data showed initial jobless claims at 217K, slightly above projections, while Q4 productivity held steady at 3.2%. Friday's US employment report will deliver fresh insights into wage growth through Average Hourly Earnings and the headline Nonfarm Payrolls figure, with consensus expecting 200K new positions versus January's surprisingly strong 353K reading.
Market expectations continue pricing in potential Federal Reserve rate reductions beginning in June, following Chair Powell's congressional testimony reiterating the central bank's data-dependent approach. Powell acknowledged the possibility of policy easing later this year, contingent upon inflation metrics progressing toward the Fed's 2% target. This dovish guidance has contributed to USD weakness across currency markets, including against its Canadian counterpart.
