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USDCAD Market Update

11/4/2022 11:42 AM

During the Asian session, the USD/CAD pair is actively declining, retreating from local highs since October 21, renewed yesterday, and is testing 1.3660 for a breakdown.

On Friday, investors are focused on publications from the US and Canada on the dynamics of the labor market for October: analysts do not expect any strong results, and therefore the main changes in the vector of movement of the trading instrument may be due to an analysis of the further monetary policy of the central banks of these countries. For example, last week, the Bank of Canada unexpectedly slowed down the pace of monetary tightening, raising the base overnight lending rate by 50.0 basis points instead of the expected increase by three-quarters of a percentage point but the governor of the regulator, Tiff Macklem, announced further "hawkish" rhetoric aimed at fighting with inflation, the annual rate of which in September amounted to 6.9%. By the end of the year, its pace should slow to 3.0%, and in 2024 the indicator will return to the target value of 2.0%. Preliminary estimates suggest that employment in the country will grow by 10.0K, slowing down by more than two times compared to September figures. The US economy, in turn, may show the creation of about 200.0K new jobs outside the agricultural sector, and the unemployment rate will increase by 3.6%, while in Canada, it is likely to rise by 5.3%.

The business activity statistics from the Institute of Supply Management (ISM) released yesterday in the US put additional pressure on the position of the US currency: the indicator in the services sector in October fell from 56.7 points to 54.4 points, which was noticeably worse than market expectations of 55.5 points. The employment index in this area fell sharply from 53 points to 49.1 points, while analysts expected only 51.6 points.

On the daily chart, Bollinger bands reverse into a horizontal plane: the price range is narrowing, reflecting the emergence of multidirectional trading dynamics in the short term. The MACD reversed downwards after rising throughout the week but retained its buy signal (the histogram is above the signal line). Stochastic turned lower, reversed at the level of "80," reflecting that the US dollar may become overbought in the ultra-short term.

Resistance levels: 1.3700, 1.3759, 1.3807, 1.3853. | Support levels: 1.3650, 1.3600, 1.3550, 1.3500.

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