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Canada's employment grew 24.9k in November, better than expectation of 14.2k.

Unemployment rate rose from 5.7% to 5.8%, matched expectations, and continuing an upward trend observed since April.

Total hours worked fell -0.7% mom and were up 1.3% on a year-over-year basis.

On a year-over-year basis, average hourly wages rose 4.8%, similar to the increase recorded in October.

Full Canada employment release here.

This article goes over different tools and indicators covering EURCAD, in some cases, cross-pairs can provide trade setups of a different nature as the US Dollar is partially taken out of the equation. Trading in financial markets requires an overview of different types of tools and the same applies to forex trading.

Talking points

• Inflation Rate Overview – European Union and Canada
• Daily Chart Technical analysis
• Sentiment Indicators: Commitment of Traders report, and OANDA’s order book.
• Relative Rotation Graph

Inflation Rate Overview – European Union and Canada

Source: Bloomberg Terminal

Inflation Rates globally are declining faster than expected and as global Central banks continue to tread carefully, traders continue to speculate on Central banks’ moves and are sometimes overwhelmed by conflicting central bankers’ comments or analyst’s opinions. Many Market participants are convinced that the recent decline in inflation suggests that Central banks should consider rate cuts, but Central banks still have concerns about inflation returning in any form.

The latest CPI report from the EU shows inflation continues to decline reaching 2.4%, close to The European Central Bank (ECB) target of 2%. The current CPI may suggest that the ECB can hold interest rates at its current level but doesn’t warrant any rate cuts. ECB Nagel commented this morning that “Inflation risks are skewed to the upside”. The next CPI release is scheduled for December 19th, 2023, please check the economic calendar and your local time. In Canada, it’s a slightly different story, although the inflation rate is also declining the same as it is globally, it is declining at a slower pace than the EU. The inflation rate currently stands at 3.1%, down from its highs of 8.0% seen in June 2022.

Daily Chart Technical analysis

Source: Tradingview.com

• EURCAD price broke and closed below an intermediate trendline identified on the above daily timeframe chart, with no pullback to retest the broken level so far. The broken level was also a confluence of Support represented by 3 commonly used Moving average periods, EMA9, MA,9, MA21, and the monthly pivot point at 1.4800
• Applying the weekly Stochastic indicator onto the Daily timeframe to smooth the readings suggests that EURCAD may be overbought and shows that %K just crossed below %D along with the break below the intermediate trendline mentioned above.
• Applying Daily RSI with its default period of 14 shows that RSI is so far in line with price action, however, it is currently neutral near level 50.
• MACD line crossed below its signal line and the Histogram is also turning bearish.

Sentiment Indicators: Commitment of Traders report, and OANDA’s order book.

COT Report

Source: Tradingview.com

The Commitment of Traders report offers insights about positioning changes in the futures market, although delayed, it still helps as a sentiment tool in a trader’s arsenal. Comparing Position levels on the latest COT report shows that Large Speculators on both currencies are favoring long positions, however, it also suggests that the Canadian Dollar is closer to its extreme than the Euro, thus a higher probability of Sentiment change. The above chart is for EURUSD and USDCAD side by side with the COT report applied to both. (COT for Canadian Dollar is inverted, CADUSD)

OANDA’s Orderbook Indicator

Source: OANDA.com

Another sentiment tool is the OANDA Orderbook Indicator, the above image reflects an aggregate view of pending entry orders on EURCAD for OANDA’s clients, the data falls under the Retail Traders category. The above image suggests that Retail traders are looking to buy as the price falls and sell as it rises, this is the typical retail trader sentiment and needs to be thought of carefully as Retail Traders can sometimes be in the opposite direction in trendy markets. The order book also reflects price levels that have the highest number of pending orders, these levels can be critical as the price continues to move regardless of direction. It is also important to note that the order book percentages include exit orders such as Stops and limits, we can continue to follow up on position percentage changes.

Relative Rotation Graph

Source: Optuma.com

The Relative Rotation graph RRG (A measurement for Momentum and Relative strength) on the daily time frame shows EURUSD, GBPUSD, AUDUSD, and NZDUSD are currently in the Leading Quadrant, with EURUSD leading the pack and CADUSD attempting to catch up from the Improving quadrant. The arrow direction for all pairs except CAD is so far pointing south towards the weakening quadrant.

On a daily chart, we see a drop in crude oil from 130 area as a five-wave move within wave A that bottomed at 62 - 57 support area. It was a strong drop and spike back in May, when energy bottomed, so we are tracking a higher degree correction from there; wave (B), which can be much higher than firstly thought; there can be room for 100. And the reason is a strong bullish trend back in September, which is looking impulsive, labeled as completed A, so be aware of more gains after current deep set-back in B is completed.

Looking at the 4h time frame (right) oil is coming down despite OPEC that can be trying to stabilize the prices after countries agrees to deepen voluntary oil output cuts down to 70-72 area as recent bounce to 79/80 resistance unfolded as subwave (4). If we are correct, then there can still be some itneresting bounce-back later this month.

EURJPY remains in red and holding near three-week low on Friday, on track for the first weekly loss in five week and the biggest drop since the second week of March.

Initial signal of larger rally stall was also generated by November’s monthly Doji with long upper shadow and overbought conditions on monthly chart.

Daily studies already turned bearish as 14-d momentum moved into negative territory and double bear-cross (5/20 and 10/20DMA) formed on daily chart.

However, fresh bears still look for confirmation of failure swing pattern on daily chart, as pullback faced headwinds on approach to pivotal Fibo support at 160.51 (38.2% of 154.38/164.30 bull-leg) which resulted in a second daily Doji candle, signaling indecision.

Firm break of 160.51 to confirm bearish near-term stance for extension through 160 (psychological) towards 159.34 (50% retracement of 154.38/164.30).

Daily Tenkan-sen (162.15) marks upper pivot and break higher would sideline near-term bears.

Res: 161.96; 162.15; 162.44; 162.88.
Sup: 161.00; 160.51; 160.00; 159.61.

EURGBP continues to trend south and hit new 3 ½ month low on Friday, in extension of steep and uninterrupted downtrend from 0.8765 (Nov 16 peak).

The pair is on track to complete the second week of heavy losses, after November’s close in red marked the biggest monthly loss since May.

Fresh signals that the ECB will start cutting interest rates before BoE, after the latest comments from Bank of England’s hawks that rates may stay elevated for longer, additionally weighed on the pair.

Friday’s break below the base of thick daily cloud (0.8616) generated fresh bearish signal, which requires confirmation on weekly close below the cloud.

Daily studies are in full bearish setup but overextended and warning about possible corrective action in coming sessions.

Cloud base and 100DMA (0.8616/38 respectively) reverted to resistances which should ideally cap upticks and guard 0.8650/61 (Nov 16 former higher low / broken Fibo 38.2%).

Res: 0.8616; 0.8638; 0.8661; 0.8674.
Sup: 0.8596; 0.8567; 0.8556; 0.8523.

• Canada’s job growth expected to expand by 15,000
• US ISM Manufacturing PMI projected to accelerate to 47.6

The Canadian dollar continues to gain ground against a slumping US dollar. In the European session, USD/CAD is trading at 1.3529, down 0.23%.

The Canadian currency is poised to post a third straight winning week against the greenback and soared 2.25% in November. It is a busy Friday, with Canada releasing the employment report, the US publishing the ISM Manufacturing PMI and Fed Chair Powell speaking at an event in Atlanta.

Canada’s labour market has softened but remains in good shape and has shown expansion for three straight months. The economy is expected to have added 15,000 jobs in November, slightly lower than the 17,500 reading in October. The market consensus for the unemployment rate stands at 5.8%, compared to 5.7% in October.

Canada’s GDP posts negative growth

This week’s GDP report was another reminder that the economy remains weak. Third-quarter GDP declined by 0.3% q/q, below the revised o.3% gain in Q2 and the first decline since the second quarter of 2021. High interest rates have cooled the economy and exports were down in the third quarter as global demand remains weak. On an annualized basis, GDP slid 1.1% in the third quarter, compared to a revised 1.4% gain in Q2 and shy of the market consensus of 0.2%.

The US wraps up the week with the ISM Manufacturing PMI. The manufacturing sector has been in a prolonged slump and the PMI has indicated contraction for twelve consecutive months. The PMI is expected to improve to 47.6 in November, compared to 46.7 in October. A reading below 50 indicates contraction.

Investors will be listening closely to Jerome Powell’s remarks today, looking for hints about upcoming rate decisions. Powell has stuck to his script of a ‘higher for longer’ rate policy, but the markets have priced in a rate cut in May at 84%.

USD/CAD Technical

• USD/CAD tested resistance at 1.3564 in the Asian session. Above, there is resistance at 1.3665
• 1.3494 and 1.3434 are providing support

Market picture

The crypto market has added 1.5% in the last 24 hours, bringing the capitalisation back to the 1.44 trillion level, which has been acting as resistance for the last three weeks. The upward movement has intensified since the beginning of December.

Bitcoin rose 9.4% to $37.7K in November, strengthening for the third consecutive month. In terms of seasonality, December is considered a relatively neutral month of the year, adding half the time over the past 12 years. The average gain is 30.8%, while the average decline is 12.8%.

December started on the upside, returning BTCUSD to another test of highs near $38.4K. The price went up with the start of a new day and month before touching the lower boundary of the trading channel. Such dynamics look like an attempt to accelerate the growth trend.

Ethereum is adding 3.8% over the day, having returned to test $2100 – a horizontal resistance which withstood the bulls’ onslaught several times in November and was a turning point in April. A move above opens up a wide untraded range, giving ETH freedom of movement all the way to $3500.

News background

SEC chief Gary Gensler said the agency is working closely on numerous applications for spot Bitcoin ETFs. Still, it is not helpful to comment on timing or anticipate future decisions on them. He reiterated the Commission’s position that bitcoin is a commodity.

Coinbase’s team has met with the SEC 30 times in a year and a half but has not received an answer to the question of whether certain assets belong to securities, said Brian Armstrong, the exchange’s CEO.

MicroStrategy bought 16,130 BTC in November at an average price of $36,785. The company’s total reserves reached 174,530 BTC. In total, the company has about 174.5K BTC on its balance sheet, with an average purchase price of $30.2K.

The U.S. Treasury Department has asked lawmakers to give the agency expanded powers to fight illegal financing through cryptocurrencies. Cryptocurrency services and mixers could be used for this purpose.

Bankrupt cryptocurrency exchange FTX received bankruptcy court approval and began selling $744 million worth of crypto assets to Grayscale Investments.

Mining pool AntPool, which received a record $3.1 million Bitcoin transaction fee, said it was willing to reimburse it.

• Swiss franc climbs to 4-month high
• Swiss GDP rises 0.3%
• US ISM Manufacturing PMI expected to rise slightly

The Swiss franc is lower on Friday. In the European session, USD/CHF is trading at 0.8723, down 0.22%.

Swiss franc continues to climb

The Swiss franc continues to power higher against a slumping US dollar. USD/CHF has fallen 1% this week and plunged 3.8% in November. On Thursday, USD/CHF touched a low of 0.8684, its lowest level since July 31.

The Swissie’s rapid appreciation is likely causing sleepless nights at the Swiss National Bank. Policy makers at the central bank follow the exchange rate carefully and have not hesitated to intervene in the currency markets as a monetary policy tool. The stronger Swiss franc has helped dampen inflation but the SNB doesn’t want the currency to be too strong since that hurts the crucial export sector. If the Swiss franc continues to lose ground, the SNB could respond with some verbal intervention and express concern about the Swiss franc’s high value.

Swiss inflation is in a good place, within the 0%-2% target, but the economy remains weak. Swiss GDP rose by just 0.3% q/q in the third quarter, up from a revised -0.1% in Q2 and above the consensus estimate of 0.1%. The services sector was the main driver of growth as manufacturing was flat and consumer spending posted modest growth. The GDP report noted that the “international environment remains challenging”. Global demand remains weak, and the EU, which is Switzerland’s largest export market, posted 0% growth in the third quarter.

The US wraps up the week with the ISM Manufacturing PMI. The manufacturing sector has been in a deep slump and the PMI has indicated contraction for twelve consecutive months. The PMI is expected to improve to 47.6 in November, compared to 47.6 in October. A reading below 50 indicates contraction.

We will also hear from Federal Reserve Chair Powell later today. Investors will be looking for hints about upcoming rate decisions. Powell has stuck to his script of a ‘higher for longer’ rate policy, but the markets have fully priced in a rate cut by May, up from 65% a week ago.

USD/CHF Technical

• USD/CHF is testing resistance at 0.8736. Below, there is support at 0.8650
• 0.8736 and 0.8774 are the next resistance lines

UK PMI Manufacturing was finalized at 47.2 in November, up notably from October's 44.8. This marks the third consecutive month of rising PMI figures and the highest level since May.

Despite these gains, it is important to note that the PMI has remained below the neutral 50 mark for 16 consecutive months, indicating a prolonged period of contraction in the manufacturing sector.

Rob Dobson, Director at S&P Global Market Intelligence, commented, "Although the downturn in production eased sharply in November, the latest PMI report brings little festive cheer when the finer details are considered."

Dobson pointed out that despite improvement in production, the sector faces ongoing challenges. These include sharp declines in new order inflows and exports, along with clients destocking, which collectively suggest that a robust and sustained revival in meaningful growth is not yet on the horizon.

Dobson also noted, "Manufacturers are preparing for tough times ahead, with their continued caution leading to cutbacks in staffing, inventories, and purchasing."

Full UK PMI Manufacturing final release here.

• USDCHF bounces from 4-month lows
• Oversold signals create hopes for a rebound
• An advance above 0.9100 is required

USDCHF extended its three-week bearish wave, dipping as low as 0.8683 on Thursday before closing the day with mild gains above the 0.8700 round level.

Although Friday’s session started with weak momentum ahead of the ISM business PMI figures, traders might attempt to push the pair higher according to the technical indicators. The RSI is near its previous lows in the oversold zone, while the stochastic oscillator has started to make higher highs and higher lows to exit the oversold zone below 20, both making an upside reversal or some stability likely. Moreover, Thursday’s candlestick seems to have taken the form of a bullish hammer, but more gains are required to confirm it.

On the upside, the area between 0.8815 and 0.8900 formed by the 61.8% and 50% Fibonacci retracement levels of the previous upleg could be a hurdle given the constraints within the region. A decisive close above it could underpin buying appetite, lifting the price forcefully up to the 200- and 50-day simple moving averages (SMAs), where the 38.2% Fibonacci mark is also located at 0.8980. Additional gains from there might take a breather around 0.9045 before the attention turns to the 23.6% Fibonacci level of 0.9080 and the 0.9100 psychological mark.

In the bearish case, where the price slips below 0.8737, support could commence within the 0.8660-0.8683 territory. If that base proves fragile, the pair might fall directly to July’s eight-year low of 0.8551. A continuation below 0.8500 could see a test around the January 2015 barrier of 0.8370.

All in all, USDCHF could switch into recovery mode in the short-term, though only a bounce above 0.8900 would add credence to a potential rebound.