Loonie rallies as wages accelerate and oil price rally continues

• Canada lost 6,400 jobs in July as the unemployment rate rose for a third straight month
• Canadian wage pressures jump to 5.0%, which might not let policymakers signal that the peak in rates is in place
• Crude prices rally for a sixth straight week on OPEC+ determination to keep oil market tight

USD/CAD

The past few weeks have not been kind to the Canadian dollar, but that could be changing.  The general rise in the dollar has stemmed from concerns over the US debt situation.  With both the Fed and BOC in similar positions when it comes to their respective tightening cycles, the Canadian dollar seems like it might be better positioned over the short-term as traders unwind their US dollar bets.  The USD/CAD shows the correlation with rising oil prices has not provided much support to the loonie, but that could be changing here.  If bearish momentum accelerates, further downside could target the 1.3300 handle.  The Canadian dollar could remain in oversold territory a while longer, which could support a further decline towards the 1.3250 region.  To the upside, the 1.3400 level provides major resistance.

Oil

Crude prices are rising as the dollar drops following a mixed NFP report and as OPEC+ remains committed to keeping the oil market tight.  Saudi Arabia’s decision to extend a unilateral 1-million barrel oil cut did not surprise anyone. Energy traders however wanted to see if Russia would extend their export cut pledge and they did.

Oil is at a 3-month high and starting to attract more buyers.  The crude price rally could continue since the US economy remains resilient and if China’s data next week confirms that part of the world’s crude demand is growing. The $85 level should provide key resistance for WTI crude, but if that doesn’t slow the rally, every trader will have their eyes on the $90 level.

Gold

Gold prices are rallying as the bond market selloff ends following a mixed NFP report that did not derail some expectations that the Fed is still probably done raising rates.  This jobs day still suggests a soft landing is obtainable but if wage growth remains strong over the next couple of months that could create some problems.  Higher rates for longer is still an environment that gold can thrive in, especially if Wall Street becomes fixated over the deficit.

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