USD/CAD eyes test of 1.2850, up from earlier sub-1.2750 lows as risk appetite fades

USD/CAD has bounced from earlier lows under 1.2750 and is back to multi-month highs around 1.2830.
The move higher comes amid a broad deterioration in risk appetite.
But a strong Canadian jobs report is helping the loonie outperform its risk-sensitive G10 peers.

Joel Frank Independent Analyst

USD/CAD spiked lower in the aftermath of the simultaneous US and Canadian labour market data release at 1330GMT, with the pair briefly dipping below the 1.2750 level, but has since reversed sharply higher. The pair is now trading back at multi-month highs in the 1.2830 area, having nearly hit 1.2850, with gains of around 0.2% on the day. The loonie continues to trade within the confines of a bullish trend channel, which suggests the path of least resistance remains to the upside.

Risk appetite deteriorates

The retracement higher from early session lows comes amid a broad downturn in risk appetite since the US open that has seen both stocks and oil markets sell-off in unison. No one theme is weighing on risk appetite, but traders are citing continued uncertainty regarding Omicron and further hawkish rhetoric from Fed members (this time from FOMC’s James Bullard) in wake of the US jobs report. For reference, the headline November NFP number was much weaker than expected, but the household survey showed the unemployment rate dropping more than expected to 4.2% and the participation rate ticking higher. Most analysts interpreted the report as in fitting with the theme of an already tight and still improving US labour market.

But CAD holds up well

The risk appetite downturn has done the most damage to risk-sensitive AUD, NZD, NOK, and SEK, which are between 0.8-1.2% lower on the session. The loonie is doing comparatively better likely because the November Canadian jobs report was much stronger than expected. The economy added more than 150K jobs, nearly 80K of which were in full-time employment, on the month, well above expectations for a 35K gain. Meanwhile, the unemployment rate sank to 6.0% versus expectations for a much more modest drop to 6.6% from 6.7% in October. The report will boost expectations for the BoC to turn more hawkish in the coming weeks and stay decisively ahead of the Fed in terms of monetary tightening.

Author

Joel Frank

Independent Analyst

Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018, specialising in the coverage of how developments in the global economy impact financial asset

GBP/USD back to 1.3250, down modestly for the day

GBP/USD now comes under fresh downside pressure and recedes toward the mid-1.3200s on Tuesday, partially reversing the optimism seen at the beginning of the week. Meanwhile, Cable’s bearish tone follows the resumption of the upside traction in the Greenback, always amid the sharp rally in USD/JPY.

EUR/USD looks inconclusive in the low 1.1400s

EUR/USD alternates gains with losses in the 1.1420 region in the latter part of the NA session on turnaround Tuesday. The pair’s vacillating price action comes amid the lack of clear direction in the US Dollar. Meanwhile, market participants are expected to gear up for the upcoming key releases on the US docket and developments from the ECB Forum in Sintra.

Gold clings to daily gains beyond $4,000

Following multi-month lows near $3,950, Gold now manages to regain some composure and reclaim the area beyond the key $4,000 yardstick per troy ounce on Wednesday. Still, any meaningful recovery appears limited as a broadly firmer US Dollar and rising US Treasury yields weigh on the yellow metal.

Coinbase, BlackRock, Visa and Stripe support Open Standard’s OUSD stablecoin

Open Standard on Tuesday unveiled Open USD (OUSD), a dollar-pegged stablecoin designed for global payments, backed by more than 140 companies. The founding coalition spans payment networks, banks, fintech firms, technology platforms and crypto infrastructure providers, including Shopify, Google, Ripple, Solana, Coinbase, Visa, Mastercard, Stripe, BlackRock and BNY.

Why a hawkish Bank of Japan could trigger the next Bitcoin sell-off

The Japanese Yen hits a 40-year low of 162.00 against the US Dollar, raising concerns about intervention or additional rate hikes by the Bank of Japan. BoJ may sell US Treasuries to buy back Yen, potentially pushing US bond yields higher and making Bitcoin less attractive to investors.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.