Key points:
- The USDCAD pair was trading down over 260 pips on the jobs report.
- The Canadian dollar also benefitted from the rising crude oil prices.
- However, the pair seems set to close lower for the week as the greenback weakens.
The USDCAD currency pair was trading down over 260 pips as the Canadian dollar rallied against its US peer following the release of an upbeat Canadian labour market report for October by Statistics Canada, which overshadowed the US nonfarm payrolls.
The loonie’s rally was driven by the fact that the Canadian economy added 108,300 new jobs in October, smashing analysts’ expectations of 10,000 additional jobs by a wide margin as the unemployment rate remained stable at 5.2%, missing analysts’ consensus estimates of a slight uptick to 5.3%.
Also read: CFD Forex Trading Guide.
The Canadian dollar benefitted from the US dollar’s overall weakness despite the US adding 261,000 jobs in October, which was much higher than the 200,000 jobs expected by most analysts. The US dollar’s weakness was also fueled by the higher unemployment rate, recorded at 3.7%, overshooting analysts’ estimates by 0.1%.
The rising unemployment rate in the United States leaves the Federal Reserve in a bind since most investors expect it to implement a lower rate hike in December, given that it has aggressively raised interest rates throughout the year, and its interest rates are the highest among developed countries.
The Fed raised its base lending rate to 4% on Wednesday. Many expect it to hike interest rates by a lower margin in December and next year to prevent the American economy from sliding into a full-blown recession.
The USDCAD currency pair had broken below the resistance level highlighted in the chart below. However, it was healing lower as the loonie took full advantage of the rising oil prices. In addition, investors’ optimism about the global economy and lower rate hikes by leading central banks fueled the risk-on sentiment.
The pair seems likely to end the day significantly lower as the US dollar continues to weaken across the board, and the loonie benefits from the higher oil prices and robust labour market.
*This is not investment advice.
The USDCAD price chart.
The USDCAD currency pair was trading down 271.2 pips (1.97%) as the loonie rallied against the US dollar.
