USDCAD pares the biggest daily loss since 2016 above 1.3500, focus on BOC’s Macklem US inflation

• USDCAD licks its wounds after initially picking up the bids.
• Covid headlines, mixed US data weigh on sentiment and propel the pair.
• Retreat in the WTI Crude Oil prices adds strength to the pair’s recovery moves.
• Contradiction between the US and Canadian jobs report highlights a speech from BOC Governor Macklem, US CPI.

USDCAD treads water around 1.3530, after a gap-up opening, as bulls seek fresh clues heading into Monday’s European session. The Loonie pair’s latest rebound could be linked to the retreat in Canada’s main export item, the WTI Crude Oil, as well as the risk-off mood. However, a reassessment of the recently flashed catalysts from Canada and the US challenged the pair buyers of late.

The market’s latest risk-aversion could be linked to the fresh fears of China’s covid controls, as well as geopolitical fears surrounding Russia. On the same line are the mixed concerns over the US Federal Reserve’s (Fed) next move, mainly due to the recently mixed US jobs report.

China’s rejection of the hopes of dumping zero-covid policy joined an uptick in the virus numbers from the dragon nation to offer a negative start to the week. Even so, hopes of an increase in private investments in the world’s second-largest economy keep the buyers hopeful.

That said, the WTI Crude Oil prints mild losses around $91.00, after refreshing the monthly high the previous day, as fears of less demand joined hopes that the US may broker an agreement with Russia to ease the supply crunch.

It should be noted that the contrast between US and Canadian jobs reports drowned the USDCAD prices the previous day.

The US Nonfarm Payrolls (NFP) for October arrived at 261K versus 200K expected and 315K upwardly revised prior. However, the Unemployment Rate surprised markets by rising to 3.7% compared to 3.5% previous readings and 3.6% market forecasts.

On the other hand, the Canadian jobs report for October printed good numbers as the Net Change in Employment rose by 108.3K versus 10K expected and 21.1K prior. Further, the Unemployment Rate reprinted 5.2% figures versus 5.3% forecasts whereas the Participation Rate increased to 64.9% versus expectations of being unchanged at 64.7%.

“Four Federal Reserve policymakers on Friday indicated they would still consider a smaller interest rate hike at their next policy meeting despite strong jobs data,” mentioned Reuters.

Amid these plays, the S&P 500 Futures print mild losses while fading the previous day’s rebound from the lowest level in two weeks. That said, the US Treasury yields remain sluggish around the multi-day highs printed the previous day.

Looking forward, Thursday appears to be the key data for the USDCAD pair traders as it offers the US Consumer Price Index (CPI) and a speech from the Bank of Canada (BOC) Governor Tiff Macklem. Given the recent talks of the Fed’s pivot and strong Canada jobs report, both these events may convince bears should they match market forecasts.

Technical analysis

A sustained daily closing below the 50-DMA, around 1.3500 by the press time, becomes necessary for the USDCAD bears.