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The Loonie continues to strengthen amid mixed employment data in the US and in anticipation of local economic data.

Isaac Figueroa

The Loonie is in a rally mode this morning and it is continuing to appreciate, as seen over the last few days. The mixed data in the US is helping the Loonie to get some buying pressure. The Loonie traded flat in yesterday’s trading session right after the gross domestic product year to year came in at 1.7 percent versus the expected 1.6 percent. However, this morning the manufacturing PMI numbers came in at 53, when the expected numbers were 53.6.

For now, the “risk on” mode of the FX markets are giving the benefit of the doubt to the US-China negotiations, where Trump has made tremendous progress, but it does not mean there is a deal. Trump also said that Huawei was not discussed in the talks, but it will be.

Technically speaking, the USD/CAD is still on a long-term uptrend; however, in the short-term, it has a strong momentum to the downside. At the moment it is trading at 1.3110, which is a new 85 day low. Probably the best-case scenario for the Loonie in the short-term is for the USD/CAD to fall towards 1.3075. If that level is broken for whatever reason today, the uptrend of the USD/CAD might change to a downtrend (stronger Loonie). It is probably too soon to expect that to happen though.

The US dollar index increased 0.17 percent in yesterday’s trading session, continuing to digest yesterday’s dovish Fed announcement. On the release side, initial jobless claims jumped to 253k versus the 215k expected. The previous release of jobless claims were 199k. Furthermore, the Chicago purchasing manager for January came in at 56.7 versus 61.5, lower than expected. The jump in jobless claims is a bit disconcerting because it might be the first indicator of a recession; however, the reason might be because of imperfect data due to seasonal adjustment factors as well as the government shutdown. Emerging market currencies have continued to outperform since yesterday’s trading session.

This morning, the change in non-farm payrolls came in at 304k versus the 165k expected, the unemployment rate for January came in at 4.0 versus the 3.9 percent expected, and the average hourly earnings came in at 0.1 versus the 0.3 expected. The market is ignoring the non-farm payrolls’ positive data, but at the same time, the unemployment rate came in worse than expected.

The Euro slipped through the day yesterday after the ECB’s Weidmann said that German GDP would probably be “well below” 1.5 percent through 2019. However, this morning the EUR/USD pair is rising 0.25 percent after the US job growth surges, but the US unemployment rate rose. The Euro-Zone consumer price index core year to year for January came in at 1.1 percent versus the 1.0 forecast and the Euro-Zone consumer price index estimate year to year for January came in at 1.4 percent as expected.

The British Pound is falling this morning after Brexit headlines have been sidelined a little over the last hours. Traders are waiting patiently for any signs as to who gives in first, or at least whoever gives a little first – the UK or the EU, or both, should negotiations go swimmingly.

Pound traders will have an eye on next week’s Bank of England monetary policy announcement. We’re seeing some commentary suggesting they could toe a hawkish line following recent positive employment and price data, but they’re at least nailed on to leave interest rates on hold.

The Aussie dollar was sold off overnight after the release of weaker than expected China Caixin Manufacturing PMI. The data showed a significant drop, from 49.7 in December to 48.3 in January. Given the close trade relations between Australia and China, any weak Chinese data print of this nature always tends to have an impact on AUD/USD.

However, the AUD/USD pair is flat this morning, erasing initial losses from overnight economic data from China. It has bounced from 0.7237 to an intraday high of 0.7284 this morning.

The NZD/USD pair is rising 0.12 percent this morning. There hasn’t been much to go on in terms of local data and it is trading stronger than the Aussie dollar. It touched an intraday high of 0.6942 this morning.