After ending 2021 with strong gains, the Canadian dollar didn't miss a beat and continued to show volatility on the first day of the New Year, this time posting sharp losses. In the North American session, USD/CAD is trading at 12761, up 0.95% on the day.The US dollar is showing broad strength on Monday, courtesy of a surge in US Treasury yields. The 10-Year rose 0.07% to 1.57%, while 30-Year notes climbed 0.06% to 1.95%.
Last week, the markets didn't react to the massive upswing in Omicron cases, relying on reports that Omicron caused milder symptoms than other COVID variants. With risk appetite intact, USD/CAD fell by 1.3%. However, with the US breaking records of the number of cases, the market's mood has shifted, with growing concerns about the ability of health services to cope with the spike in infections. Nervous investors have flocked back to the safe-haven US dollar and sharply lowered the Canadian dollar. The Canadian dollar is sensitive to risk appetite, so the currency could continue to show sharp movement this week as the markets focus on Omicron headlines.
Looking at the week ahead, the US releases ISM Manufacturing PMI and JOLTS Job Openings on Tuesday, followed by the FOMC minutes on Wednesday. On Friday, both Canada and the US will release key employment reports, highlighted by US nonfarm payrolls for December. This will be the final NFP report before the Omicron wave, and the consensus is for a gain of 400 thousand new jobs, up from 210 thousand in November.
USD/CAD Technical
- USD/CAD has support at 1.2756. Below, there is support at 1.2615
- There is resistance at 1.2987. Above, there is resistance at 1.3077
