Canadian Dollar Update, November 5, 2021 – Canadian dollar slumps ahead of jobs data
USD/CAD Open: 1.2468-72, Overnight Range: 1.2454-1.2478, Previous Close: 1.2460
WTI Oil is at $80.53 and gold is at $1,803.50. US markets are higher today.
For today, USD resistance is at 1.2486. Support is at 1.2443.
- Canada and US employment reports on tap
- GBPUSD continues to suffer
- US dollar consolidating gains
The Canadian dollar added to losses in an uneventful overnight session. USDCAD climbed from 1.2380 on Wednesday morning to 1.2478 in early Toronto trading today ahead of the US and Canadian employment reports for October.
The Canadian dollar slump is due to a somewhat more hawkish than expected FOMC meeting, coupled with a drop in crude oil prices, and broad US dollar demand against the G-10 major currencies.
The Fed said it would begin tapering asset purchases to the tune of $15.0 billion per month. At that pace, the coronavirus pandemic monetary stimulus will be fully removed by June 2022. That news was expected but the surprise was Fed Chair Powell’s failure to push back against market pricing of rate hikes as soon as May or June 2022.
The US dollar surged on the news and consolidated those gains overnight. However, bond traders appear to be less concerned. US 10-year Treasury yields have fallen from 1.60% to a low of 1.522% overnight.
Traders expect nonfarm payrolls to rise 425,000 in October and for the unemployment rate to trick down to 4.7% from 4.8%. Stronger than expected data will reinforce speculation that the Fed will be forced to raise rates earlier than anticipated which should give the greenback additional support.
Canada is expected to have added 19,300 jobs, compared to September block-buster 157,1000 gain. It is still a positive as it would be the fifth consecutive increase. In addition, Canada Ivey PMI is expected at 62.7.
USDCAD will face major resistance in the 1.2500-05 area, around the 10:00 am option expiry window, when $1.32 billion of strikes expire.
EURUSD traded defensively and is sitting at the bottom of its overnight 1.1533-1.1562 range. Weaker than expected German Industrial Production data (actual -1.1% m/m vs forecast 1.0%) and soft Eurozone Retail Sales (actual -0.3%m/m vs forecast 0.2%m/m) weighed on prices. ECB policymakers Luis de Guindos and Yannis Stournaras weighed in with claims inflation pressures were temporary. The EURUSD technicals are bearish below 1.1650.
GBPUSD continues to suffer after the Bank of England (BoE) surprised markets and left interest rates unchanged. GBPUSD plunged from 1.3650 to 1.3470 following the monetary policy statement and extended those losses to 1.3426 in early NY trading.
USDJPY traded in a 113.57-113.86 range, with the currency pair pressured by the latest drop in US Treasury yields. The Japanese government is considering minor fiscal stimulus in the form of cash payments to those under 18.
AUDUSD is at the bottom of its 0.7370-0.7407 range after the RBA Quarterly Statement on Monetary Policy reaffirmed the central bank’s dovish outlook. NZDUSD retreated due to broad US dollar demand.
Today’s Suggested Range USD/CAD: 1.2420 – 1.2520