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The Canadian dollar and the USD / CAD pair will continue in forex this week

Currency pair of the week: USD / CAD

With the Bank of Canada meeting on Wednesday and US CPI data on Friday, the USD / CAD pair may experience some volatility in the currency market!

On Friday, the United States posted nonfarm payrolls at +210,000 versus an expectation of +550,000. Equally important, the unemployment rate increased from 4.6% to 4.2%, with an increase in the activity rate. However, the mixed jobs report shouldn’t really affect the results of next week’s FOMC meeting, as the Fed will focus on two other issues when they meet: inflation and the Omicron. On Friday, the markets will analyze the CPI data for November. The expectation for the title to print is 6.7%! The expectation for Core printing is 4.6%! The Fed is targeting 2% inflation! Last week, Powell threw in the proverbial towel when he testified before the Senate and Banking Committee that he was dropping the word “transitional” to describe inflation. However, he still believes that inflation will start to fall in the second half of next year. He also said the Fed could end its withdrawal a few months earlier than expected. Omicron is the other variable the FOMC will be monitoring. So far, reports have been mixed regarding the severity of the coronavirus variant. Will the FOMC wait for more information before deciding whether to accelerate the pace of bond purchases? Look out for more headlines this week.

The Bank of Canada (BOC) will meet Wednesday this week on stellar employment data for Canada, also released on Friday. Canada added 153,700 jobs to its economy in November compared to an expectation of just +35,000 and +31,200 in October. Employment figures in Canada are split between part-time and full-time jobs. Sometimes that puts the title number in doubt. However, not last month. The jobs were divided almost 50/50. Furthermore, the unemployment rate fell from 6.7% to 6.0%, even with the participation rate unchanged! The Bank of Canada will also question higher inflation and the Omicron variant. Canada’s headline data for October was 4.7% from 4.4% in September. The November print will be released next week and is expected to be 4.7%. Remember that the Bank of Canada surprised the markets at its last meeting when they finished their bond buying program. There will be no new forecasts at this meeting, therefore the Bank of Canada is expected to keep interest rates unchanged at this meeting. This will give them more time to see how the Omicron variant evolves before their next meeting.

USD / CAD recently retraced 100% from the falling wedge from which the pair collapsed on October 21 near 1.2362. Also, it broke above a long-term triangle (green line) dating from July 5. So far, the USD / CAD pair holds its September 29 highs at 1.2775. However, if the couple USD / CAD crosses below Friday’s low at 1.2743, it may fall to the horizontal support at 1.2600. Shown below are the 50- and 200-day moving averages at 1.2538 and 1.2473. Previous short-term horizontal resistance is at 1.2897, 1.2949 and long-term horizontal resistance at 1.2990.

USD / CAD daily chart

Source: Tradingview, Stone X

With the Bank of Canada meeting on Wednesday this week and US CPI data on Friday, the USD / CAD pair may experience some volatility in the currency market this week. And don’t forget the oil! If he oil price Crude recovers after last month’s sell-off, USD / CAD could move lower in the forex market, at least until the FOMC meeting!
By Joe Perry, Forex.com » Official site

Disclaimer: The information and opinions in this report are provided for general information only and do not constitute an offer or solicitation to buy or sell currency or CFD contracts. Although the information contained in this document has been taken from sources considered reliable, the author does not guarantee its accuracy or completeness, and does not assume responsibility for any direct, indirect or consequential damages that may result from the fact that someone trusts such information.

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