USD/CAD saw renewed selling pressure in the North American session as Canadian employment data came in ahead of expectations. The pair has broken lower from a range that had played out for most of the week and trades at the lowest level since September 2016.

The unemployment rate in Canada dropped to 6.5% versus an expected and prior 6.6%. The headline increase was reported at 45,300 and although it reflected mostly part-time jobs, the figure was significantly ahead of the analyst consensus for an additional 11,400 jobs in June.

Employment data out the US was mixed as the headline figure of 222,000 beat expectations while the unemployment rate ticked back up to 4.4% from 4.3%. Average hourly earnings fell short with an increase of 0.2% last month and the prior month was revised down to show a gain of 0.1% from the originally reported rise of 0.2%.

While the US jobs report did not provide any indication of upward price pressure, the dollar managed to post a small gain following a period of volatility.

The Canadian Jobs Report has given Canadian dollars bulls more reason to believe that the Bank of Canada will raise rates at their monetary policy meeting next week. However, several factors signal that the bullish run in the loonie may be coming to an end.

The Bank of Canada threw markets off guard in June by announcing intentions to raise rates but at the same time did not provide any guidance regarding timing. While the markets have now nearly fully priced in a hike at next week’s meeting, a poll conducted by Reuters shows that a majority of economist believe the BoC won’t act this month.

The Reuters poll showed that 17 of 31 economists do not expect that bank to raise rates on Wednesday. The main factor driving this decision is that economists believe the central bank will want to wait to further assess progress from recent attempts to cool the housing market.

Another factor that stands to impact the value of the loonie is the price of oil. Historically, monetary policy has not been a big driver for the Canadian dollar and periods of divergence with oil prices in the past as a result of policy changes have been short-lived. Today’s rally in the loonie has widened the divergence gap even further which tends to create an even bigger risk for the currency in the event the BoC does not raise rates next week.

Crude oil prices (USOIL) had a strong start to the month but a three-day decline shows prices retreating into negative territory for the month thus far. A technical break earlier this week below a rising trendline best seen on an hourly chart has set a bearish tone and despite a large draw in yesterday’s inventories report, bears defended the broken trendline on a retest, resulting in a daily close in the red.

USD/CAD traded in a range for most of the week, and today’s range break stands to keep the pair under pressure in the near-term. The next area of interest to the downside falls at 1.2834 marking the high from the first quarter of 2015 which also acted as support in the fourth quarter of the same year.

USD/CAD 4-Hour Chart

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