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The USDCAD Pair Recovers to Weekly Highs

12/6/2022 11:33 AM

The US dollar shows mixed trading dynamics, consolidating near 1.3600 and local highs from November 29. The day before, the USD/CAD pair showed active growth in response to the publication of optimistic macroeconomic statistics from the US. In particular, traders drew attention to a sharp increase in the Services PMI from the Institute of Supply Management (ISM) in November from 54.4 points to 56.5 points, with a forecast of a decline to 53.1 points.

In turn, significant pressure on the position of the US dollar was exerted by news from China, where, after prolonged protests, the authorities are going to somewhat soften the quarantine measures introduced in connection with the increased incidence of COVID-19. In particular, restrictions were eased in Shanghai and Hangzhou over the weekend. It is expected that in the near future China may announce that citizens can now self-isolate at home if the disease is mild.

At the end of last week in Canada, a report on the labor market for November was published, according to which the number of employed citizens increased by 10.1 thousand after an increase of 108.3 thousand in the previous month, while analysts expected a more modest growth of 5.0 thousand. At the same time, the Unemployment Rate in November corrected from 5.2% to 5.1%, while the market expected 5.3%, and the Average Hourly Wage slowed down from 5.5% to 5.4%.

Investors are gearing up for the Bank of Canada monetary policy meeting on December 7. It is expected that the interest rate will be adjusted by 0.25% or 0.50%, which will eventually be the most significant increase since 2008. Experts believe that an increase in "hawkish" rhetoric will bring the indicator to 4.25%, and the base value to 6.45%. Earlier, representatives of the Canadian regulator acknowledged that inflationary pressures in the country are increasing, and consumer prices are rising faster than projected, which requires decisive steps to tighten monetary policy; however, experts are confident that officials are at the stage of curtailing the cycle of interest rate hikes, and each subsequent decision will increasingly depend on economic indicators.

Bollinger Bands in D1 chart show moderate growth. The price range is expanding from above but it fails to conform to the development of "bullish" sentiments at the moment. MACD grows, preserving a stable buy signal (located above the signal line). The indicator is also trying to consolidate above the zero level. Stochastic is also showing moderate growth, but is rapidly approaching its highs, indicating the risks of overbought US dollar in the ultra-short term.

Resistance levels: 1.3600, 1.3650, 1.3700, 1.3807. | Support levels: 1.3550, 1.3500, 1.3450, 1.3400.

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