Daily Market Recap - USDCAD

The Canadian Dollar rallied sharply earlier in the week after the Bank of Canada (BoC) announced that it will hold interest rates steady. The banks deputy governor Lane was quoted stating that the BoC is “more confident in their outlook for growth and inflation” in light of resurging global investment and the stabilizing of PMI figures.

However today, the USDCAD is posting significant gains on the back of strong US economic data and weaker than expected Canadian figures. The double whammy of news releases caused the pair to increase 0.64 percent over the previous day at the time of writing.

US nonfarm payrolls put in a strong performance coming in at 266k versus a market consensus of 180k. Average hourly earnings also beat expectations standing at a 3.1 percent increase year over year. Finally, the cherry on top of the cake was the unemployment figures decreasing to 3.5 percent. In contrast to these positive economic figures, the Canadian unemployment rate rose to 5.9 percent (previously 5.5). The most shocking was the net change in employment figures. The expectations were set for a 10k increase whereas the actual figures came in at a drop of 71.2k. The result of these economic data releases strongly favored the USD over the CAD.

(Chart Source: Tradingview 06.12.2019)

From a technical point of view, the USDCAD is maintaining the overall uptrend pattern since November as price action today shrugged off concerns of a reversal. However, trade volumes remain low which opens the door for large price swings in either direction. It can be noted the gains today did not overcome levels seen after the announcement by the BoC to maintain interest rates, i.e. 1.3277. Perhaps traders are still keen on carrying trade positions to take advantage of the interest rate differential between the two countries.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.