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USD / CAD remains below 1.3000 ahead of key economic data release

  • USD / CAD hit new multi-year lows on Monday, but rebounded sharply.
  • However, sellers entered hard below 1.3000 to keep the pair subdued as the focus shifts to the crucial data this week.

The USD / CAD It has been oscillating today between fresh multi-year lows just below 1.2930 and highs of 1.2990. The move from lows to previous highs appears to have been fueled by a sudden surge in demand for the USD, but sellers seemed willing to hold the cross below 1.3000 ahead of a week packed with key data on both the US and US sides. Canadian border.

Other key issues to consider this week will be what happens with OPEC +; The cartel has reportedly delayed its meeting until December 3 (Thursday), given the need for more time for talks. As long as OPEC + can meet market expectations of at least three months of renewed production cuts, this should keep oil prices relatively well supported and in turn help the CAD. If the cartel disappoints and oil plummets, this, of course, doesn’t bode well for the loonie.

Key US and Canadian data to watch this week …

At 13:30 GMT on Tuesday, Canadian GDP data for September and Q3 are released, and Q3 growth is expected to be 47.0% (annualized QoQ). September growth is forecast to be 0.9% (month-on-month), a slight moderation in the month-on-month growth rate in August of 1.2%. The September GDP data is likely to be considered a bit outdated, given the recent worsening of the Covid-19 situation in North America since October.

As of 15:00 GMT on Tuesday, the US ISM Manufacturing PMI for November is released, and the main number is expected to be 57.9. As always, the sub-indices (such as Employment, New Orders, Prices Paid) will also be closely watched. In fact, new orders – the most forward-looking aspect of the report – hit 67.9 last month, its highest level since January 2004, which bodes well for US manufacturing in the months ahead. Wells Fargo notes that the pandemic has seen consumers shift their spending for services (that is, experiences that have been shut down) towards physical goods, supporting the global rebound in manufacturing. Furthermore, “with multiple effective vaccines on the horizon, we will look for signs of an acceleration of business investment in US manufacturing data,” the bank says.

At 15:00 GMT on Thursday, the US ISM Services PMI for November is released, with the main number expected to be 56.0. Most analysts expect the U.S. service sector to weaken in the coming months as a direct result of Covid-19 restrictions and higher levels of cautious behavior exhibited by consumers amid higher levels. prevalence of the virus during winter. Some suggest that the weakness in the services survey data could increase pressure on the Fed to ease policy somewhat in December.

Finally, on Friday, the official labor market reports for the United States and Canada are released at 13:30 GMT. Starting with the United States report; The US economy is forecast to have added 500,000 jobs in November, bringing the unemployment rate down modestly from 6.9% to 6.8%. Despite consensus expectations of an increase in total US employment, TD Securities sees a “high probability of contraction in the December report”, reflecting the fact that the bank expects “the trend The decline in the unemployment rate at least stops in the next few months before vaccines help the employment momentum to be positive again during the course of 2021 ”.

Moving on to the Canadian labor market report; The economy is projected to add a modest 27,500 jobs, leaving the unemployment rate unchanged at 8.9%. CIBC notes that “the job market was able to weather the rally in virus cases for longer than anticipated, but it is likely that Covid caught up with Canadian employment in November.” The bank explains that its below-consensus forecast for the economy eliminated approximately 10,000 jobs in November “takes into account the public health restrictions implemented in late October and early November, but does not include the latest closures in parts of the country, such as they occurred after the survey reference period ”.

USD / CAD creates a new range, but for how long?

To the upside, resistance at 1.2995 keeps USD / CAD gains contained. This level served as support for most of last week until Friday, since it has turned into resistance. On the downside, the 1.2930 area has proven to be strong support for the second time this month.

So this area is likely to form a sort of short-term range for the USD / CAD to merge until this week’s crucial US and Canadian labor market data really shakes things up from a fundamental perspective.

While contained within the intraday range mentioned above, USD / CAD also continues to trade within the confines of a downtrend channel; to the downside, this trend line linked the lows of November 16, 18 and 24 and to the upside it linked the highs of November 13, 19, 23 and 24.

In case this trend channel comes into play as resistance around the 1.3030 level, which also roughly coincides with the highs of last Wednesday, Thursday and Friday. If USD / CAD takes the path of least resistance, which would be to continue its downward pace within the limits of this trending channel, then another test of multi-year lows at just under 1.2930 is likely. Once this level passes, the next key support area is at more than two big numbers, just below 1.2800.

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