The Canadian dollar is usually quiet before North American markets open, but it is sharply higher today. USD/CAD is trading at 1.3644 in Europe, down 0.73%.
US nonfarm payrolls expected to slow
The week wraps up with the October employment reports from the US and Canada. The highlight will be the US nonfarm payrolls (NFP) report, which, although still a key event, has been somewhat overshadowed by Fed rate meetings and inflation releases. Still, the release will be carefully watched by Fed policymakers and it will be a factor in the December rate decision. The October consensus stands at 200,000, lower than the September reading of 263,000. With the markets split 50/50 on whether the Fed will raise rates by 0.50% or 0.75%, the NFP release could provide some volatility in the currency markets in the North American session. A stronger-than-expected reading would raise the likelihood of a 0.75% hike and would likely boost the dollar. Conversely, a soft reading would reinforce expectations of the Fed easing to 0.50%, which would be bearish for the dollar.
Canada is expected to post lukewarm job data for October. The unemployment rate is forecast to tick up to 5.3% from 5.2%, with a consensus of 10,000 new jobs, down from 21,100 new jobs in September. Any misses in the forecasts for the Canadian and US job reports could trigger volatility from USD/CAD in the North American session.
The Fed raised rates by 0.75% at this week’s meeting, as expected, but there was a double message for the markets. The rate statement was dovish, stating that the Fed might take a pause in order to see how the rate hikes were working. However, Fed Chair Powell was hawkish in his post-meeting comments, saying that there was no sign that inflation had peaked and that it was “very premature to talk about pausing rate hikes”. The unexpected hawkish tone sent equities lower and boosted the US dollar.
USD/CAD Technical
- USD/CAD is putting strong pressure on support at 1.3656. Below, there is support at 1.3478
- 1.3757 and 1.3901 are the next lines of resistance