USD/CAD Forecast: Head-and-Shoulder Pattern Hints at Probable Losses

USD/CAD is trading sideways at around 1.2500 as investors await the US nonfarm payrolls and Canadian employment data. The US nonfarm jobs data comes two days after the ADP nonfarm employment figures. The additional number of employed people was 330,000 in July compared to the prior month’s 680,000. Analysts had expected a reading of 695,000. Besides, the initial jobless claims missed the estimates of 384,000 by coming in at 385,000.

In today’s event, analysts expect the nonfarm payrolls to have increased by 870,000 in July compared to June’s 850,000. Besides, the forecasted unemployment rate of 5.7% is better than the prior month’s 5.9%. Better-than-expected figures will likely boost USD/CAD.

The currency pair will also react to Canada’s employment numbers. The predicted reading of 177,500 is lower than June’s 230,700. Besides, the country’s unemployment rate is expected to have declined from 7.8% to 7.4%.

USDCAD technical outlook

USD/CAD is consolidating at 1.2500 as investors await further cues from the US and Canadian jobs data later in the day. After hitting a three-and-a-half-week low of 1.2422 last week on Friday, the bulls have failed to gather enough momentum to yield a rebound to the crucial level of 1.2600. At the time of writing, it was up by 0.05% at 1.2510.

On a four-hour chart, it is trading slightly below the 25 and 50-day exponential moving averages. In the near term, it is likely to trade sideways at around 1.2500 ahead of the US nonfarm payrolls and Canada’s employment numbers. The formation of a head-and-shoulder pattern, which is a bearish formation, hints at probable losses.

The bears will likely gain control and push USD/CAD to last week’s low of 1.2422. Below that level, the next target will be at 1.2355. On the flip side, the bulls will need to clear the resistance at 1.2576 to get to the next target at 1.2600. Further buying pressure would place the resistance level at 1.2665.