USD/CAD picks up from 1.3940 lows ahead of US and Canadian data

The US Dollar bounces up from 1.3940 lows against the Loonie but remains below the 1.4000 level.
US employment data adds to the case for Fed monetary easing next week.
In Canada, the IVEY PMI is expected to show that business activity accelerated in November.

Guillermo Alcala FXStreet

The US Dollar is showing moderate gains against its Canadian counterpart on Thursday, trading at 1.3970 after bouncing from five-week lows near 1.3940. From a wider perspective, however, the immediate trend remains bearish, amid the BoC-Fed monetary policy divergence, after depreciating more than 1% in less than two weeks.

The US labour market remains in focus on Thursday, following an unexpected 32K net loss of jobs in November, as reported by the ADP Employment Change. These figures contrast with the 5K increase anticipated by the market consensus and signal a significant deterioration, compared to October’s upwardly revised 47K increase.

On Thursday, the US Challenger Job Cuts reported 71,321K layoffs in November, down from the 153,074K reported in September. The market is now focusing on the weekly Jobless claims, due at 13:30 GMT, which are expected to show that first-time applications for unemployment benefits increased to 220K in the last week of November from 216K in the previous one.

In Canada, the IVEY Purchasing Managers' Index is forecast to show an improvement to 53.6 in November's business activity, from the 52.4 reading seen in October. These figures come after the strong Q3 Gross Domestic Product (GDP) data released last week, which, if confirmed, will support the view that the Bank of Canada (BoC) will keep interest rates on hold in December.

The US Federal Reserve (Fed), on the contrary, is widely expected to cut rates after its December 10 meeting. The CME Group's Fed Watch Tool shows an 89% chance of a 25 basis points rate cut next week and between two and three further cuts next year. This keeps the US Dollar on its back foot against most of its peers.

Economic Indicator

Initial Jobless Claims

The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment insurance. A larger-than-expected number indicates weakness in the US labor market, reflects negatively on the US economy, and is negative for the US Dollar (USD). On the other hand, a decreasing number should be taken as bullish for the USD.

Why it matters to traders?

Every Thursday, the US Department of Labor publishes the number of previous week’s initial claims for unemployment benefits in the US. Since this reading could be highly volatile, investors may pay closer attention to the four-week average. A downtrend is seen as a sign of an improving labour market and could have a positive impact on the USD’s performance against its rivals and vice versa.

Economic Indicator

Ivey Purchasing Managers Index s.a

The Ivey Purchasing Managers Index (PMI), released on a monthly basis by the Ivey Business School at Western University, is a leading indicator gauging business activity in Canada. The data, which is seasonally adjusted, is derived from surveys of senior executives at private-sector companies. The PMI includes both the public and private sectors. Respondents indicate whether their organizations’ activity is higher than, the same as, or lower than the previous month across the following five categories: purchases, employment, inventories, supplier deliveries and prices. The data can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the economy is generally expanding, a bullish sign for the Canadian Dollar (CAD). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for CAD.

GBP/USD flirts with four-week highs past 1.3500

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EUR/USD treads water around 1.1550

EUR/USD trades in a narrow range around 1.1550 of Monday. The pair’s inconcluisve price action comes as investors continue to assess Friday’s disappointing US jobs data in a context where renewed tensions in the Middle East lend decent support to the US Dollar.

Gold corrects from tops, holds on above $4,300

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Pi Network: Mild bearish bias caps PI corrective rebound

Pi Network extends losses Monday after a bearish close the previous day, as price remains capped below the $0.1000 psychological threshold. Speculative demand for PI is low, with Open Interest holding above $9 million as broader market sentiment improves. The technical outlook for PI indicates a mild bearish bias as the $0.0961 resistance level remains intact.

US Payrolls miss – RBA on deck tomorrow

It would be remiss of me not to kick off this morning’s report with a rundown of last Friday’s US jobs report, which was a belter. Headline payrolls fell by 23,000, versus expectations of an 80,000 gain. The BLS noted that May was revised down by 66,000 (from 129,000) and June by 37,000 (from 57,000), resulting in combined May-June revisions of 103,000 lower than previous reports.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.