- USDCAD extends its rally for six consecutive days.
- Initial applications for unemployment benefits in the United States increased less than estimated, highlighting the “overheating” of the labor market.
- The US Services PMI remained in expansionary territory, showing corporate resilience.
- Canada’s Trade Balance: September’s surplus was almost double August’s downwardly revised figure.
The USD/CAD It is advancing strongly in the North American session after the Federal Reserve (Fed) rate hike of 75 basis points on Wednesday, which was initially perceived as a moderate increase. However, Fed Chairman Jerome Powell later balked at expectations of a Fed pivot, reiterating the need for “higher longer”. In addition, the data on employment in the US revealed by the Department of Labor confirms what Powell said regarding the rigidity of the labor market. At the time of this writing, the USD/CAD is trading at 1.3728, up 0.27% from its opening price.
Good US economic data and Fed hangover overshadowed Canada’s trade surplus
Wall Street continues to extend its losses following the Fed’s decision. US initial jobless claims for the week ending October 28 were lower than expected, rising by 217,000 versus estimates of 220,000. , despite the fact that the US economy continues to weaken, according to specific economic indicators. Despite the fact that the data shows the overheating of the labor market, applications for unemployment benefits increased by 1.49 million in the week ending October 22, the highest figure since March. If the uptrend continues, it could be the first sign that the labor market is loosening.
Meanwhile, the Institute for Supply Management (ISM) released the services PMI, which rose by 54.4, below forecasts of 55.3, while factory orders on a month-on-month reading rose 0.3%, better than the previous month, but in line with estimates.
Apart from this, the Fed’s decision caused mixed reactions among market participants. The monetary policy statement was perceived as dovish as the Fed considered “accumulated tightening” to its credit. However, Federal Reserve Chairman Jerome Powell acknowledged that the pace of rates would be slower. He added that the spike in rates compared to September projections should be revised higher, sending US stocks tumbling, US Treasury yields rising and the dollar on its way.
In the case of USD/CAD, after touching a daily low at 1.3547, it rallied towards its daily high at 1.3712, a complete 180 degree turn.
Canadian economy posts surplus but fails to support CAD
On the Canadian front, the trade balance for September showed a surplus reinforced by exports of crude oil and wheat. The surplus amounted to C$1.1 billion, below estimates of C$1.2 billion, from a downwardly revised C$550 million in August.
As for housing data, Canadian building permits for the same period plummeted 17.5%, compared to a 6.1% contraction, estimating a headwind for the already battered Loonie. According to Statistics Canada, this is the first time all surveyed components have posted monthly declines since September 2019.
What to do
By Friday, the Canadian and US economic calendar will feature employment numbers.
USDCAD Key Technical Levels
|last price today||1,373|
|Today I change daily||0.0019|
|Today’s daily variation in %||0.14|
|Daily opening today||1.3711|
|Previous daily high||1.3714|
|Previous Daily Low||1.3549|
|Previous Weekly High||1.3774|
|Previous Weekly Low||1.3496|
|Previous Monthly High||1.3978|
|Previous Monthly Low||1.3496|
|Daily Fibonacci of 38.2%||1.3651|
|Daily Fibonacci of 61.8%||1.3612|
|Daily Pivot Point S1||1.3602|
|Daily Pivot Point S2||1.3493|
|Daily Pivot Point S3||1.3437|
|Daily Pivot Point R1||1.3767|
|Daily Pivot Point R2||1.3823|
|Daily Pivot Point R3||1.3933|
Source: Fx Street