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Canadian Dollar consolidates amid Oil price rebound, US labor data in focus

  • USD/CAD consolidates around 1.4210 at the start of a week dominated by US labor market data.
  • US-Iran talks and rebounding Oil prices help limit downside pressure on the Canadian Dollar.
  • Scotiabank says the US Dollar rally looks extremely stretched, leaving room for a modest pullback.

USD/CAD trades around 1.4210 on Monday at the time of writing, as investors remain on the sidelines ahead of a series of key US labor market releases, culminating with Thursday's June Nonfarm Payrolls (NFP) report. The US Dollar (USD) is edging lower, while the Canadian Dollar (CAD) is not finding support from rebounding Oil prices.

Market participants are now focused on the May JOLTS Job Openings report, the ISM Manufacturing Purchasing Managers Index (PMI) and the June ADP Employment Change data, all of which will precede the official employment report. These releases could shape expectations for the Federal Reserve's (Fed) monetary policy after Chairman Kevin Warsh recently said the central bank should refrain from providing forward guidance under the current policy environment.

On the geopolitical front, investors are watching Tuesday's talks between the United States (US) and Iran regarding the situation around the Strait of Hormuz. The improved diplomatic outlook has reduced safe-haven demand for the US Dollar, although markets remain highly sensitive to any renewed escalation in the Middle East.

The Canadian Dollar is also not benefiting from the recovery in Oil prices. West Texas Intermediate (WTI) trades around $70.60 at the time of press, up 0.68% on the day, after rebounding from an earlier decline triggered by reports that Washington and Tehran would resume negotiations. Higher Crude prices typically support the Canadian currency, given Canada's status as a major Oil exporter, but the Loonie remains weighed down by earlier Crude losses.

According to Scotiabank strategists Shaun Osborne and Eric Theoret, the Canadian Dollar may also benefit from narrower short-term US-Canada yield spreads. The bank estimates USD/CAD's fundamental fair value at 1.4135 and notes that positioning indicators point to an extremely overbought US Dollar. Scotiabank argues that this could cap further gains toward the 1.4250-1.4300 area and open the door to a modest pullback toward 1.4075-1.4080.

Canadian Dollar Price Today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.37%-0.45%0.10%0.09%0.12%-0.20%-0.25%
EUR0.37%-0.08%0.48%0.45%0.51%0.19%0.12%
GBP0.45%0.08%0.56%0.54%0.57%0.24%0.19%
JPY-0.10%-0.48%-0.56%-0.01%0.00%-0.33%-0.36%
CAD-0.09%-0.45%-0.54%0.01%0.02%-0.31%-0.37%
AUD-0.12%-0.51%-0.57%-0.00%-0.02%-0.32%-0.36%
NZD0.20%-0.19%-0.24%0.33%0.31%0.32%-0.04%
CHF0.25%-0.12%-0.19%0.36%0.37%0.36%0.04%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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