The dollar lost some ground by the end of Friday's session following the release of the latest Non-Farm Payrolls in the U.S. This is likely to add to the already existing selling pressure on the greenback, which is expounded upon by our newest analysis of the EURUSD pair.
The U.S. labour market added fewer jobs in December than it was initially forecasted, despite the fact that headline unemployment fell to its lowest level since February 2020. The dollar weakened in the few hours following the release of the Bureau of Labour Statistics (BLS)' s report.
As can be seen on the 4H chart above, the price action of USDCAD falls within the boundaries of a massive descending channel. The newly developing downtrend appears to be in the early stages of establishing a broad 1-5 impulse wave pattern, as postulated by the Elliott Wave Theory.
Following the release of the December Non-Farm Payrolls, the price action broke down below the 38.2 per cent Fibonacci retracement level at 1.27062, and it is currently headed towards the 61.8 per cent Fibonacci at 1.25467. A temporary dip is likely to be reached there, provided that the price action does indeed manage to penetrate below the major support area (in green).
Such a dip would likely entail the completion of the second impulse leg (2-3) of the Elliott pattern, which is likely to be then followed by its second retracement leg (3-4). The likelihood of such a temporary rebound is further bolstered by the fact that the lower limit of the descending channel is about to converge with the 61.8 per cent Fibonacci.
According to the findings of the BLS, the U.S. labour market added just 199 thousand new jobs in December vs 426 thousand expected. Nevertheless, the main unemployment rate shrunk to 3.9 per cent from the 4.2 per cent recorded a month prior.
The dollar weakened because of the deaccelerating pace of jobs creation following an otherwise very strong period of economic expansion.