- USD / CAD stabilizes at the lows of 1.2000 ahead of a huge liquidity gap.
- The bears look for a run to test the 1.10 area on a breakout of 1.2000 as the focus turns to BoC.
The USD / CAD It is currently trading 8 pips above the low of 1.2048 and is down 0.17% so far this day after pulling away from the highs of 1.2092.
The loonie rose across the board as oil prices rose, and the currency held close to a six-year high that it touched the day before.
OPEC + ‘s decision to stick with its plan to gradually restore supply to the market has supported one of Canada’s major exports. In addition, the pace of nuclear talks between Iran and the United States is slow and markets expect oil demand to overtake the spot as the world economy recovers at a faster rate than anticipated.
Meanwhile, the US dollar is also cheerful, rebounding from a five-month low against major pairs measured in a basket of currencies in the DXY index. At the time of writing, the DXY is trading unchanged for the day, but has peaked at 90.24.
The dollar is getting some traction as talks about the Fed’s phase-down picks up, but it has also started to regain its balance as the currency market turns its attention to this week’s US employment data. .UU.
Non-farm payrolls likely rose strongly by pre-COVID standards, however analysts at TD Securities have a forecast that implies a still sizable net decline of 7.7 million from the pre-COVID level. “The unemployment rate probably resumed its downtrend after a surprising increase in April.”
“While familiar ranges prevail throughout the G10 complex, we continue to monitor USD / CNY for broader directional signals,” analysts at TD Securities said, “there, the USD is on track for a third day of gains despite of a fairly benign solution overnight. ”
Meanwhile, Sentiment is on a quiet day in terms of event risk and the Federal Reserve’s Beige Book countdown to the top of the hour that is expected to reflect activity around May 24.
Meanwhile, Canada’s central bank has already started to cut back on its bond purchases and next Wednesday’s meeting will be of great interest to traders as more stocks are expected in the coming months, possibly July.
In the closer term, Canada’s employment report for May will be released on Friday, which has shown surprising resilience in recent quarters.
Combined with the recent rise in inflation of 3.4% YoY that surpassed the upper limit of the Bank of Canada’s target range in April, a strong employment report may prompt markets to price even more aggressively by the Bank of Canada. BoC at the June 9 meeting.
Furthermore, the latest CFTC data showed that CAD positioning has moved sharply into net long territory, but some positioning may hamper further gains in the loonie going forward.
USD / CAD technical analysis
The 1.2000 support may hold for now, but if it were to break below the May 2015 low near 1.1920, there is a liquidity gap to the 1.10 area and then the July 2014 low near 1.0620.
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