- A risk aversion boost strengthened the US dollar at the expense of the Canadian dollar.
- US Services PMI for November came in better than expected, triggering a 120-point jump in the release.
- The Bank of Canada is expected to raise rates by 25 basis points on Wednesday.
The Canadian dollar (CAD) weakens against the US dollar (USD) while USD/CAD recovers to the 1.3500 level, buoyed by positive United States (US) economic data released on Monday and a strong November jobs report on last Friday. Thus, USD/CAD is trading at 1.3576 after reaching a daily low of 1.3384.
Sour sentiment and US services PMI optimism underpinned USD
Risk aversion is the name of the game. The Institute for Supply Management (ISM) reported that the November services index grew at a faster rate than the estimate of 53.3, standing at 56.5, while showing that the price index sub-component added to inflationary pressures. in the US For their part, factor orders in the US for November increased by 1% against expectations of a 0.7% increase, above the data for September.
USD/CAD reacted higher, rising more than 120 points in three hours, from 1.3400 to 1.3520. Of late, the major currency extended its rally to fresh all-time highs at 1.3581.
On top of this, last week’s dovish speech by Federal Reserve (Fed) Chairman Jerome Powell, saying that easing of interest rate hikes could happen as early as December, plunged the dollar. However, last Friday’s US non-farm payrolls report consolidated the case for further rate hikes. November numbers stood at 263,000, beating consensus of 200,000, while average hourly earnings rose 5.1% yoy, above forecasts of .9%.
Meanwhile, on the Canadian agenda last week, third-quarter Gross Domestic Product (GDP) surprised with a 2.9% qoq increase, while jobs data showed the economy added 10,100 jobs, in line with the consensuses.
On Wednesday, the Bank of Canada (BOC) will announce its monetary policy, and analysts are divided between a rate hike of 25 or 50 basis points. Analysts at TD Valores Bursátiles expect a rate hike of 25 basis points, which would bring rates to the 4.00% threshold. Later in the week, BOC Lieutenant Governor Kozicki will give a statement, followed by trade balance and building permits for October.
USD/CAD Price Analysis: Technical Perspective
The daily chart shows that USD/CAD has a bullish bias, breaking above a three-month-old descending resistance trend line drawn from the October highs. Traders should note that a daily close above the latter would expose the November 29 daily high at 1.3645. However, on its way north, USD/CAD needs to break above the psychological 1.3600 mark, followed by first and then 1.3700.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
