- USD/CAD returned to the 1.2400 level after briefly testing its 21 DMA above 1.2420.
- This week, the pair’s focus is on OPEC+ and Fed meetings, as well as US and Canadian jobs data.
USD/CAD is currently flirting with the 1.2400 level, up around 0.2% on the day, amid a lack of notable fundamental catalysts in recent hours.
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The pair changed hands as high as 1.2420 at one point, bringing it closer to its 21-day mobile average of 1.2422. But it has since drifted away from these highs. In Canada, building permits showed early in the session with an intermensual increase of 4.3 percent versus forecasts of 3.1 percent. However, the data provided little support for the Canadian dollar on Tuesday. With the USD/CAD cotización rising in response to the broader market dynamics.
Despite the global equities bull market, FX markets have taken on a more risk-averse tone, with risk-sensitive currencies like the AUD, NZD, and NOK doing the poorest in the G10. While safe havens like the JPY and USD have performed the best.
Data and central banks
The conclusion of the FOMC and BoE policy meetings on Wednesday and Thursday. As well as US data in the shape of the October ISM services PMI on Wednesday and the October jobs report on Friday, will be the main focus for FX markets this week.
Along with the US report, Canadian jobs statistics will be revealed on Friday. A more hawkish than expected outcome from the Fed and the Bank of England could support the USD and GBP. But it could also lead to similar hawkish policy changes from the Bank of Canada, which most analysts believe will stay a step ahead of the Fed in terms of monetary policy normalization. Limiting the CAD’s downside.
Indeed, if this week’s Canadian labor market report supports the case for the Bank of Canada’s first rate hikes. The Canadian currency is poised to be one of the top performers in the G10.
OPEC+ meets this week
As always, CAD traders should keep an eye on oil market dynamics; OPEC+ met on Thursday,.
According to a Bloomberg poll released early Tuesday, all analysts polled expect the cartel to stick to its existing pact. Which stipulates that oil production will rise by 400k barrels per day per month until production cuts are fully reversed by mid-2022.
Oil strategists expect that in the coming months, global oil consumption will outpace oil production by a significant margin (perhaps as much as 2 million barrels per day). Contributing to tight market conditions and prices remaining well supported, despite OPEC+’s cautious approach to restoring supply.
WTI was trading at $83.00 per barrel on Tuesday, within recent ranges. If prices resume their recent upward trend, it could provide the impetus loonie traders have been looking for. Sending USD/CAD back to recent lows around 1.2300, or even to a test of annual lows around 1.2000.