USD/CAD stays near 1.31 despite upbeat employment data from Canada

• Unemployment rate in Canada falls fo 5.8% in July.
• Annual core-CPI in the U.S. rises to 2.4% from 2.3%.
• US Dollar Index gains traction and refreshes 13-month highs above 96.

With the initial reaction to the strong employment figures from Canada, the USD/CAD pair lost more than 50 pips in a few minutes but quickly recovered as the USD continued to gather strength. As of writing, the pair was trading at 1.3092, adding 0.35% on the day.

The data released by Statistics Canada today showed that the number of employed increased by 54.1K in July to drag the unemployment rate down to 5.8% from 6%. Participation rate ticked down to 65.4% from 65.5%.

On the other hand, the core-CPI, which excludes volatile food and energy prices, in the U.S. rose 0.2% on a monthly basis in July to lift the annual rate to its highest reading since September 2008 at 2.4%. The US Dollar Index, which stayed quiet around the 96 mark during the European trading hours, gained traction after the inflation data and refreshed its 13-month top at 96.31. At the moment, the index is up 0.7% on the day at 96.25.

Later in the session, the U.S. Financial Management Service will release its Monthly Budget Statement, which is unlikely to have a significant impact on the greenback's market valuation.

Technical outlook

With today's upsurge, the RSI indicator on the daily chart broke above the 50 mark to suggest that the bullish momentum is gathering strength. On the upside, the pair could face the first technical resistance at 1.3140 (50-DMA) ahead of 1.3190 (Jul. 24 high) and 1.3290 (Jul. 19 high). On the downside, supports could be seen at 1.3070 (20-DMA), 1.3000 (psychological level/100-DMA) and 1.2960 (Aug. 7 low).