USD/CAD retreats after a spike to 1.3520 following job reports

  • US economy creates 263K jobs in November against 200K of market consensus.
  • Canadian job markets adds 50.7K full time jobs in November.
  • Loonie falls versus US dollar but strengthens against other rivals.

The USD/CAD jumped after the release of the employment reports from Canada and the US and peaked at 1.3520, the highest level in two days. It then pulled back to the 1.3450 area. It is still positive for the day but off highs.

Loonie gains on data…

Despite the spike in USD/CAD, the Canadian Dollar rose versus most of its rivals boosted by job market figures. The net change in employment in Canada in November was positive by 10.1K, against expectations of 5K. Full-time jobs increased by more than 50K. Wages rose 5.6% y/y.

“Some early signs that broader inflation pressures have started to ease, and indications that domestic demand is softening, mean the BoC could be close to the end of the current interest rate hiking cycle. But we expect another 25 basis point hike to the overnight rate at next week’s central bank policy decision”, explained analysts at RBC Capital Markets.

But Dollar gains more on data

In November, the US economy added 263K jobs above the 200K of markets consensus. The Department of Labor announced the unemployment rate stood at 3.7%. Average Hourly Earnings put upward pressure on inflation, by rising 5.1%  y/y.

The US Dollar jumped across the board as equity prices slide and US Treasury yields rose. The numbers keep the door open to more interest rate hikes. “The labor market remains far too hot for the Fed’s liking, and it will take much slower growth in employment and wages to return inflation to the central bank’s 2% target on a sustained basis”, mentioned analysts at Wells Fargo.

USD/CAD up but off highs

The pair is hovering around 1.3470, up for the day but far from the daily high. The same situation applies to the daily chart. On Tuesday, the pair peaked at 1.3646 but then pulled back 250 pips, finding support around the 1.3400 zone.

The 4-hour chart still shows a bullish bias supported by the 1.3400 area, a horizontal level and also where an uptrend line stands. A break lower should strengthen the Loonie.