The U.S. dollar was hit today from the massively disappointing employment numbers in April, which missed the consensus forecasts by a long margin. Greenback's current woes were thus exacerbated in the wake of the non-farm payrolls data.
As can be seen on the hourly chart above, the USDCAD pair dropped on the news, while the prevailing market sentiment remains ostensibly bearish-oriented. This can also be inferred from the Ichimoku Cloud indicator.
Nevertheless, the price action is currently in a good place to consolidate itself in a new range around the latest dip. Even more specifically, the price action is likely to form such a consolidation range between the major support level at 1.21500 and the major resistance at 1.22000.
The new range is likely to emerge from the existing descending channel (illustrated by the trend lines in black). Notice that the strength of the resistance level is derived from the fact that it coincides with the nearest Cloud. Meanwhile, the support level is drawn from the latest dip.
These consolidation expectations are derived from the fact that the MACD indicator is presently demonstrating stabilising buying pressure.
Headline unemployment was reported at 6.1 per cent vs 5.8 per cent expected. This marks a 0.1 per cent increase from the 6.0 per cent that were recorded a month prior.
The U.S. labour market also managed to add only 266 thousand new jobs in April, while the preliminary forecasts were anticipating 990 thousand jobs to had been created last month.
The massive difference can be attributed to the more noticeable impact of unemployment benefits deterring people from rejoining the labour force, something that we alluded to in our 'weekly expectations' breakdown.
More and more people are opting to remain unemployed for the time being and live off their government checks. This trend is posing a significant threat to the underlying recovery process.