USD/CAD gains ground after strong US unemployment claims

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<li>US unemployment claims fall to two-month low</li>
<li>Canada’s retail sales expected to ease on Friday</li>
</ul>
<p>The Canadian dollar started the day with gains but the US dollar has rebounded after a strong unemployment claims report. In the North American session, USD/CAD is trading at 1.3173, up 0.07%.</p>
<p><strong>US jobless claims fall to 2-month low</strong></p>
<p>US unemployment claims fell last week to 228,000, down from 234,000 and well below the consensus estimate of 242,000. This marked a two-month low and suggests that the US labour market remains strong. Job growth may have slowed but businesses are still holding onto workers.</p>
<p>The Federal Reserve appears close to winding up the current rate-tightening cycle and is hoping that it can guide the economy to a soft landing. The robust employment numbers are an encouraging sign that a recession can be avoided.</p>
<p>The Fed will almost certainly raise rates at the next meeting on July 27^th, but what happens after that? The answer will depend greatly on inflation levels. Headline CPI has fallen to 3%, but core CPI has been stickier than anticipated and hawkish Fed members have repeated that inflation has not been falling fast enough. The money markets have fully priced in a July hike and expect a pause in September, but this could be out of step with the Fed, which has hinted at one more rate hike after July.</p>
<p><strong>Canada’s retail sales expected to slow</strong></p>
<p>Canada wraps up the week with the May retail sales on Friday. Headline retail sales is projected to fall to 0.5%, down from 1.1%, and the consensus for the core rate is 0.3%, following 1.3% in April. A weak retail sales report could weigh on the Canadian dollar.</p>
<p>.</p>
<p><strong>USD/CAD Technical</strong></p>
<ul>
<li>USD/CAD is putting pressure on resistance at 1.3205. Above, there is resistance at 1.3318</li>
<li>1.3106 and 1.3049 are providing support</li>
</ul>
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