Canadian Dollar snaps losing streak on volatile NFP Friday

• The Canadian Dollar caught a much-needed boost against the US Dollar on Friday.
• Bearish Loonie flows reversed direction after the US Dollar took a hit post-NFP.
• Souring US jobs data has knocked the Greenback sharply lower.

The Canadian Dollar (CAD) came out on top after a messy US Nonfarm Payrolls (NFP) release shattered global positioning in the US Dollar (USD) on Friday. The Greenback fell across the board after US net job additions fell well short of expectations, with previous months facing sharp downside revisions. The Loonie has pared some losses against the USD, but still remains down sharply for the week.

Canadian Dollar positioning is entirely at the mercy of US-based market positioning and risk sentiment on Friday. US jobs numbers are getting retroactively downgraded as the US labor landscape shifts beneath investors' feet. The Federal Reserve (Fed) signaled this week that it would need inflation data to remain stable and the US labor market to show signs of weakness. The second of those two flags suddenly materialized on Friday, prompting a sharp rebalancing of Fed rate cut expectations.

Daily digest market movers: Canadian Dollar catches a leg up on Greenback weakness

• The Canadian Dollar saw messy chart action on Friday before catching a rise against a waffling Greenback.
• USD/CAD has been pushed back below 1.3800 following six straight days of USD gains.
• US NFP figures came in below expectations in July, sinking to 73K versus the expected 110K.
• Investor focus was on steep downside revisions to previous NFP releases, with May and June shedding a cumulative 258K in headline revisions as US hiring sours.
• Despite getting his wish for the economic conditions that could spark interest rate cuts from the Fed, President Donald Trump fired the head of the Bureau of Labor Statistics' labor data department following Friday's NFP rout.
• According to the CME's FedWatch Tool, rate traders have pivoted to 80% odds of a rate cut on September 17, up sharply from the 40-45% odds priced in before Friday's jobs report release.

Canadian Dollar price forecast

USD/CAD got stuck in a volatility trap on Friday, briefly testing territory north of 1.3850 before taking a sharp step lower. The pair has ended a six-day winning streak for the Greenback, giving the Canadian Dollar a much-needed breather from bearish flows.

The Dollar-Loonie pair is now hamstrung in no-man's land between the 200-day and 50-day Exponential Moving Averages (EMA), trapped between key technical levels between 1.3900 and 1.3750.

USD/CAD daily chart