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The Loonie has had a pretty good week and positive news on the data side may form the foundation of economic revival and recovery.
The Canadian economy continued to rebound in line with the US after a 419,000 job gain in July and was above consensus with a third consecutive monthly increase as the unemployment rate fell to 10.9%. While there is still a way to go, the Canadian labor market has made decent progress in recovering its losses from early 2020. During March and April, Canadian employment fell by a cumulative 3,004,500. But in May, June and July, employment rose by 1,661,000, meaning more than half of the job decline has recovered.
There isn’t much data this week and the Loonie will rely heavily on geopolitical developments that boost risk sentiment. A deal on a US fiscal stimulus package may also have some positive leverage on the CAD, which coincidentally requires clear signs of a slowdown in US contagion to open up more of the positives.
The intraday bias turned positive with the current recovery after printing a low of 1.3233 . Further decline is expected as long as 1.3485 remains strong as support which has now become resistance. A break of 1.3233 will extend a larger decline to the psychological level of 1.3000 . However, a firm break at 1.3485 would indicate near term bottoming, and turn the bias back to the upside for resistance at 1.3714 .
MACD has turned positive, RSI is still showing a shift in sentiment to positive, bias is still in the form of a down bias.
In the bigger picture, the advance from 1.2061 (2017 low) has finished at 1.4667 after failing to pass further resistance 1.4689 (2016 high). The decline from 1.4667 has become a corrective pattern of 1.4689. A deeper decline requires a push to break the ascending trendline connected from the 2017 and 2019 lows with a test target of 1.2951 and further down, as long as the 1.3715 resistance holds. However, a sustained break of 1.3715, should turn the focus back to key resistance.
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