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USD/CAD fluctuates above 1.3560 ahead of US/Canadian Employment statistics, but oil prices consolidate
USD/CAD struggles to find direction as investors seek fresh indications from Canadian job data. A robust US labor market is expected to back the Fed's decision to continue its aggressive policy for an extended period. The Employment Change in Canada for December is anticipated to decrease to 8K from the previously reported 10.1K.
In the early Asian session, the USD/CAD pair is bouncing within a narrow range of 1.3560-1.3580. After a surge from the psychological support of 1.3500, the Canadian dollar has retreated to a sideways trend. After the optimistic United States Automatic Statistics Processing (ADP) Employment Change data sparked a trend of risk aversion, market participants exhibited increased demand for the US Dollar.
The US Dollar Index (DXY) rose to the key resistance level of 105.00 as rising expectations of a long-term hawkish monetary policy by the Federal Reserve (Fed) boosted the appeal of the safe-haven currency. In addition, it supported 10-year US Treasury yields and drove them above 3.72 percent. In the meantime, demand for S&P500 futures has increased after a decline on Thursday, indicating a modest improvement in investors' risk appetite.
According to the US ADP agency, the United States economy has created jobs for 235K job seekers, compared to the expected 150K. Undoubtedly, stronger labor demand indicates a robust economy, but in times of red-hot inflation, it presents the Fed with a compelling rationale to postpone a rate cut in the near future.
Friday's release of US Nonfarm Payrolls (NFP) statistics will be closely analyzed by investors in order to gain greater insight into the state of the US labor market.
Similarly, the Canadian Dollar will react to the publication of Employment data. According to the projections, the net increase in payrolls for December is 8k, compared to the earlier forecast of 10k. The unemployment rate may modestly increase to 5.2%.
Prior to the announcement of the official US Employment report, the oil price is demonstrating rangebound behavior. The black gold may gain strength since the Covid-19 scenario may reach its climax more quickly. Notably, Canada is the top exporter of oil to the United States, and rising oil prices strengthen the Canadian Dollar.
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