USD/CAD hits fresh daily highs near 1.3600 as Dollar rallies

The US Dollar sharply surges on the back of fresh US economic data, so far the Dollar Index has hit highest in almost one month. The USD/CAD pair rebounds from 1.3475 toward 1.3600 ahead of the awaited US and Canadian employment reports on Friday.

The USD/CAD is up on Thursday by more than a hundred pips booted by a stronger US Dollar. The pair peaked during the American session at 1.3587 and is trading at 1.3562 at the time of writing. It remains near the high with a firm bullish tone.

Despite falling versus the Dollar, the Loonie is outperforming on Thursday. AUD/CAD is at two-day lows while NZD/CAD dropped to the lowest since late November weakened by a deterioration in market sentiment. The Dow Jones is falling by 1.20% and the Nasdaq tumbles by 1.28%. Crude oil prices are up but off highs.

The USD/CAD could face resistance around the 1.3610/15 area and then 1.3650. The key level n the upside is seen at 1.3700. A daily close above would point to further strength. On the downside, the pair has rebounded from the relevant support of 1.3470/80; a daily close below should clear the way toward 1.3400.

Data released on Thursday showed an increase in private payrolls by 235K in December above the 150K of market consensus, according to ADP. The weekly jobless claims report showed a decline in initial claims to the 204K, the lowest since September. The December reading of the S&P Global Services PMI was revised to the upside from 44.4 to 44.7.

The US Dollar strengthened after the reports. The DXT surged to the highest level since December 8 above 105.00. US Treasury bond yields also climbed, reaching multi-day highs across the curve. The Nonfarm Payroll report is due on Friday. Market consensus is for an increase by 200K. The numbers could trigger more volatility.

In Canada employment report is also due on Friday. Traders look for employment to rise by 8k in December as the Canadian labour market starts to cool. This should push the unemployment rate back to 5.2%, although we expect full-time employment to drive the headline print amid scarce labour supply.

Traders also look for wages to push higher to 5.5% y/y with help from muted base effects, while hours worked should see a modest increase.