The Canadian dollar is showing limited movement in the North American session. USD/CAD is currently trading at 1.2822, up 0.08% on the day.
Markets eye US, Canadian job reports
The Canadian dollar is reeling after a dismal month of November. USD/CAD rose 3.22%, making it the worst month for the Canadian dollar since March 2020, when Covid-19 first appeared and sent the Canadian dollar tumbling. Earlier this week, USD/CAD broke above the 1.28 line for the first time since September. With investors jittery over the Omicron variant and a potential new wave of Covid, and Fed Chair Powell taking a hawkish pivot, the Canadian dollar could face some significant headwinds.
These two factors are weighing on the Canadian dollar, which has lost ground this week despite Canada posting solid data this week. GDP for Q3 showed a strong gain of 5.4% after a contraction in the second quarter. The Canadian economy is only 0.5% below its pre-pandemic level of February 2020, as the recovery is progressing well.
Fed Chair Powell caught the markets by surprise in his testimony before US lawmakers on Wednesday. Powell said it was time to retire the word ‘transitory’ for inflation and said that the bank would consider wrapping up its bond purchase programme several months ahead of schedule. The December 16th meeting will be a live one and if the Fed does accelerate its bond purchases, the markets will be looking for clues about a rate hike.
The week will wrap up with Canadian and US employment data, highlighted by the US nonfarm payrolls. This event is usually the week’s biggest release and is eagerly awaited, but the minds of investors are more focused on Omicron and the Fed. Still, the nonfarm payroll report could shake up the markets if the consensus of 534 thousand is wide of the mark.
USD/CAD Technical
- There is support at 1.2681. Below, there is support at 1.2569
- USD/CAD faces resistance at 1.2852, which has held since September. This is followed by 1.2911
