FXStreet notes that economists expect Canada to report a loss of jobs after seven months of gains. A disappointing report, alongside US payrolls, could be the catalyst to trigger a pare back in stretched CAD positioning. Analysts at TD Securities look to 1.28 in USD/CAD as a key resistance marker to accelerate the upside.

“We forecast -125K jobs lost in December, which would match the largest single-month decline before COVID-19 but is far less severe than the historic job losses in March/April 2020.” 

“The jobs report comes at an interesting juncture for USD bears. The backup in US fixed income yields has caused some concern that the recent consolidative tone in the broad USD might be the start of a corrective bounce higher. A larger disappointment in this jobs report versus consensus could exacerbate that concern and stretched position.” 

“This number will also have to compete for attention with US payrolls, where we also forecast a negative number. Confirmation of both could see the CAD further pare back its gains in recent weeks. 1.28 will be the key resistance marker for USD/CAD; if broken, CAD longs could be more significantly pared back.”