The overall strong performance of the dollar continues this week following the release of the better-than-expected non-farm payrolls for January. You can read more about the current state of the greenback from our last EURUSD analysis.
The latest labour market report revealed that the U.S. economy generated more jobs in January than was initially anticipated, easily beating the market forecasts. This caused the dollar to strengthen in the short term following last week's minor correction. This prompted another bullish rebound on USDCAD.
As can be seen on the 4H chart above, the underlying direction of the price action reversed following the completion of the last downtrend; which took the form of a 1-5 impulse wave pattern, as postulated by the Elliott Wave theory. The reversal itself was signified by the completion of a Double Bottom pattern at the dip of the downtrend.
The subsequent uptrend, in turn, takes the form of a bullish 1-5 pattern. For the time being, the price action is struggling to break out above the major support-turned-resistance area (in red), underpinned by the 61.8 per cent Fibonacci retracement level at 1.27690.
However, the second retracement leg (3-4) appears to be completed, which means that the price action may be due for the establishment of the third and final impulse leg (4-5) past the 61.8 per cent Fibonacci. The likely target would be the last swing peak at 1.29500.
According to the findings of the last non-farm payrolls report, the U.S. economy added 467 thousand new jobs in January, beating the consensus forecasts of 110 thousand. Nevertheless, headline unemployment rose marginally by 0.1 per cent from a month prior, reaching 4.0 per cent.
The robustly growing economic activity underlines the accelerating pace of jobs creation that was observed in the last quarter.