USDCAD stumbles towards 1.3500 amid a risk-on impulse, Canadian jobs data

• USDCAD dropped after hitting the 1.3800 weekly high last week, falling almost 2.50%.
• The Canadian employment data crushed estimates while adding to inflationary pressures due to wages reaching the 5.55% threshold.
• The US jobs data was mixed, though a higher unemployment rate could deter the Federal Reserve from hiking aggressively.

The USDCAD extends its losses to two-consecutive days, testing the 50-day Exponential Moving Average (EMA) amidst an upbeat market sentiment, as the United States mid-term elections and the US Consumer Price Index (CPI) grab the spotlight. Hence the American Dollar is falling, and the Loonie is capitalizing on it. At the time of writing, the USDCAD is trading at 1.3510, down by 0.22%.

US and Canadian job reports undermined the USD, boosted the CAD

The October US employment report was mixed, with investors focusing not on the headline figure, which showed that 261K new jobs were added to the economy, but on the Unemployment Rate, which edged higher, towards 3.7%, above the 3.6% estimates and also September’s 3.5%. Also, Average Hourly Earnings compared to the last month’s eased from 5% to 4.7% YoY, so the last couple of figures augmented investors’ speculation that the Federal Reserve would slow down its’s pace of tightening, as they expressed on its last monetary policy meeting, while also commenting that the peak of rates would be higher than September’s projections.

On the Canadian side, October’s data crushed expectations for a 10K print, with the economy adding a staggering 108K jobs. Meanwhile, the six-month trend for job creation sits at +9K, which according to TD Securities Analysts, “Is consistent with GDP growth in the mi-1s.” Regarding wages, the Average Hourly Wagest jumped by 5.5%, YoY, above 5.2% of the previous month, as it would add further pressure on the Bank of Canada (BoC) to keep tightening.

Elsewhere, the US Dollar Index, which tracks the buck’s value against six currencies, drops 0.34%., at 110.404, a headwind for the USDCAD. It should be noted that the Loonie is taking advantage of a weaker US Dollar, as oil prices are sliding as China’s backpedaled against easing Covid-19 restrictions, which would delay economic recovery and might affect the black gold prices.

What to watch

Later in the day, Fed speakers, with the Cleveland Fed President Loretta Mester and Boston’s Fed President Susan Collins, would cross newswires.

USDCAD Key Technical Levels