Canadian Dollar: USD/CAD (CAD=X) Sunk by Jobs Data
The Canadian dollar was torpedoed on Friday. A surprisingly robust U.S. non-farm payrolls report combined with an extremely poor Canadian Labour Force survey blew the Canadian dollar out of the water. USD/CAD soared to $1.3267 from $1.3170 in a heartbeat.
Canada lost 71,200 jobs in November. Even worse, the unemployment rate soared to 5.9% from 5.5% in October. Some analysts suggested that the two consecutive soft employment reports will knock the Bank of Canada off its “steady” interest rate policy perch and lead to a rate cut in January. Other analysts scoff at the idea, saying that the poor results are a continuation of the “noise” from the October election.
The U.S. data is further validation for Federal Reserve Chair Jerome Powell and his colleagues who have adopted a “wait-and-see” approach to monetary policy. Powell said the U.S. economy was in a good place and that the glass was more than “half-full.” The jobs data helps to ensure that Wednesday’s Federal Open Market Committee (FOMC) meeting results will be unchanged interest rates and therefore, a non-event.
FX markets got off to a mildly risk-averse start in Asia thanks to weaker than expected China trade data. China’s trade surplus narrowed sharply in November, led by a 1.1% y/y drop in exports. AUD/USD bore the brunt of the bad news and gave back all of Friday’s gains.
The lack of progress in the ongoing U.S./China trade talks was another negative factor. Hopes for a Phase 1 deal before the Americans raise tariffs again on December 15 are fading. U.S. officials said that a deal was close but added there were no plans for a face-to-face meeting with trade negotiators.
The risk aversion fears pressured USD/JPY, which fell from 108.65 to 108.44 when Toronto opened today. Lower U.S. Treasury yields and higher oil prices were other factors weighing on the currency pair.
The British pound was the best performing G-10 major currency compared to the G-10 major currencies. GBP/USD climbed to $1.3180 from $1.3129 on the strength of a series of U.S. election polls predicting a Conservative majority after Thursday’s election. Many analysts are concerned about the accuracy of the polls due to “strategic voting” and suggest that risk-reward favours a weaker GBP/USD from current levels.
Elsewhere, the Organization of the Petroleum Exporting Countries and Russia agreed to another 500,000 barrels/day on top of the existing 1,100,000-barrel/day production cuts to combat lower prices. Saudi Arabia sweetened the pot by adding another 400,000 to their share of the new cuts. West Texas Intermediate spike to $59.14/b in Asia but settle down to $58.65 in Toronto markets.
The only data available today is Canadian Housing Starts which won’t have an impact on trading.
Overall, the bias in prices is: Sideways.
By the way, prices are vulnerable to a correction towards 1.32.
The projected upper bound is: 1.33.
The projected lower bound is: 1.31.
The projected closing price is: 1.32.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 23 white candles and 26 black candles for a net of 3 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 38.7225. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.75. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 111 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -73. This is not a topping or bottoming area. The last signal was a buy 1 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed down -0.003 at 1.323. Volume was 54% below average (consolidating) and Bollinger Bands were 34% narrower than normal.
Open High Low Close Volume___
1.325 1.327 1.322 1.323 30,901
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.33 1.32 1.33
Volatility: 6 5 6
Volume: 45,888 63,041 77,968
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX CAD= is currently 0.4% below its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of CAD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on CAD= and have had this outlook for the last 19 periods.