Prior to the jobs data, USD/CAD is still down

Oct 07, 2022

VOT Research Desk

USD/CAD encounters some supply and ends a two-day winning run.

A few repositioning trades are underway as the USD declines ahead of the US NFP announcement.

On Friday USD/CAD pair faces selling pressure as it fails to build on its gains from the previous two trading sessions. The pair has been declining during the first half of the European session, and it is presently trading close to the day’s low, barely above the round number of 1.3700.

In light of some repositioning trading ahead of the eagerly anticipated US monthly jobs report, the US dollar declines from near to the weekly high. On the other hand, the recent positive run-up in crude oil prices and the overnight hawkish comments made by Bank of Canada Governor Tiff Macklem support the Canadian currency.

The greatest drop in output since the 2020 COVID epidemic, the agreement by OPEC+ to cut production by nearly 2 million bpd continues to benefit the dark liquid. However, worries that a worsening of the global economic crisis may reduce gasoline demand hold any additional rises in check. Additionally, the likelihood of a more aggressive Fed policy tightening should limit dollar losses and provide some support for the USD/CAD pair.

In fact, the markets have been pricing in another enormous 75 bps rate increase for November, seemingly persuaded that the US central bank will keep raising rates at a The recent hawkish comments made by many Fed members, which continue to support rising US Treasury bond rates, confirmed the bets. This promotes the possibility of some drop buying in the safe-haven dollar combined with recession worries.

Traders may also decide to hold off until the critical monthly employment data from the US and Canada, which are scheduled to be released later during the early North American session. Therefore, it will be wise to hold off on initiating new bearish bets on the USD/CAD pair until there is substantial follow-through selling before concluding that this week’s impressive comeback from the psychological level of 1.3500 has peaked.uicker clip to combat inflation.

USD/CAD Technical Report