- USD / CAD has mostly held below the 1.2800 level on Wednesday, helped by strong crude oil prices.
- Schembri’s comments from the BoC that the bank is considering tolerating an excessive rise in inflation has been largely ignored.
The USD / CAD It has mostly remained below the 1.2800 level on Wednesday, with resistance in the form of a 50-day moving average at 1.27967 that has also helped keep price action under wraps. Right now, USD / CAD is trading at 1.2760 and contemplating a test of Tuesday’s lows. Breaking below these lows would open the door for a new move south and a test of last Friday’s low just below 1.2740, which also coincides with the pair’s 21-day moving average. On the day, the Canadian dollar is trading with modest gains of around 0.1% against its US dollar counterpart and the USD / CAD is down about 10 pips.
Driving the day
USD / CAD paid very little attention to the first-tier US data releases on Wednesday; For reference, figures from ADP, a private proxy for the official main NFP number, beat expectations reaching 174,000 (forecast was for a gain of 49,000 jobs), while ISM services PMI also beat expectations. , reaching 58.3 versus the consensus forecast of 57.4. The services ISM report also contained very strong subscript numbers, the most notable of which was a jump in the employment index to 55.2 from 48.7 in December (which bodes well for Friday’s NFP number).
Rather, in recent trading anyway, the pair has drawn much more inspiration from growing crude oil markets; WTI has rallied to $ 56.00, rising nearly 3% on the day amid a cocktail of usual bullish themes including; pandemic optimism (latest updates from the US suggest the country is administering more than 1.3 million vaccines per day and the CDC said the virus is now on a downward trajectory), rising hopes of stimulus from the US. and more signs of a strong OPEC + adherence to the agreed supply cuts (Russian Deputy Prime Minister Alexander Novak reiterated that the country will aim for 100% compliance).
Meanwhile, there has been a new push in the form of the EIA’s weekly inventory update; Crude oil stocks posted a surprise drop of almost 1 million barrels from forecasts of a build of 446,000 barrels, confirming the overnight bullish private weekly API inventory data.
Comments from Bank of Canada Deputy Governor Lawrence Schembri that the bank is reflecting on whether or not to tolerate excess inflation appear to have gone relatively unnoticed; The bank is currently conducting its review of the monetary policy framework (scheduled to conclude at the end of the year). Many expect the bank to follow in the Fed’s footsteps and announce some kind of average inflation targeting regime (implying that after a period of inflation below the BoC target, they would tolerate overshoot). The policy change is moderate, and this is something that could hurt the CAD as the year progresses.
Key levels
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