The Canadian Dollar (CAD) initially strengthened on Friday, buoyed by a stellar December labor market report, but risk aversion following strong US Nonfarm Payrolls (NFP) data dampened CAD’s rally. The USD/CAD pair climbed above 1.4400, approaching multi-year highs near 1.4500, as the US Dollar (USD) surged amid reduced expectations for Federal Reserve rate cuts in 2025.

Canada’s net change in employment surprised the upside with 90.9K, a two-year high that sharply outpaced the 25K forecast and November’s 50.5K. Canadian Average Hourly Wages grew at an annualized 3.7%, slightly below November’s 3.9%, while the Unemployment Rate ticked down to 6.7%, defying expectations of a rise to 6.9%.

Meanwhile, US NFP data also impressed, with net job additions climbing to 256K, beating the 160K forecast and revised November figure of 212K. The stronger-than-expected US labor market data reinforces the Federal Reserve’s hawkish stance, diminishing hopes for aggressive rate cuts in 2025.

Market sentiment tilted towards the safety of the Greenback despite Canada’s strong jobs print. The USD/CAD pair erased early-week losses and now tests significant resistance at 1.4400. A sustained breakout above this level could pave the way for fresh multi-year highs near 1.4500.

Trade Idea:
Buy USD/CAD on a break above 1.4410, targeting 1.4500 with a stop-loss at 1.4350, given the strong USD momentum and fading CAD demand despite positive domestic data.