The Canadian dollar extended its gains against the US dollar in the wake of the Canadian job and trade data to be released on Friday. Most of the investors lost their confidence in the greenback after the FOMC minutes, which gave a breather to a basket of currencies.
At the time of writing, USD/CAD lost 0.05 percent to 1.3296 with a session high of 1.33083 and a session low of 1.32881. The pair traded below its 50-day SMA of 1.33468 and touched its 20-day SMA of 1.32889, signaling a downtrend momentum. USD/CAD found resistance at 1.33338 and support at 1.32524 as of 12:40 UTC. In case the trend continues, the pair will likely end the session between 1.33050 to 1.32600 levels.
From a wider perspective, the pair was still away from the bullish ground. In the mid of December, USD/CAD plunged to 1.30850 levels while the current pair movement was only at 1.32900 levels.
Market players are expecting the Canadian employment and trade data this Friday which may provide a support in the effort of the government and the Bank of Canada to lift the economy. The upbeat economic data of a nation can provide a temporary lift to the currency as it puts the market confidence of the investors. The BAC noted in its previous statement a more moderate economic growth in the fourth quarter with ongoing gains in employment.
In November, the unemployment rate dropped to 6.8 percent, beating the market expectation of 7 percent. Canada had the lowest unemployment rate for the last five months. During the said period, there were more than 10 thousand jobs added in the Canadian economy.
However, the BAC also admitted the significant amount of economic slack remains in Canada, in contrast to the United States, which pushed them to maintain the policy interest rate at 0.50 percent. The economic stability of a nation remains to be one of the considerations of the central bank before implementing a rate hike. In connection with this, an upbeat job data can convince the authorities to impose a rate increase, exactly what the loonie needs ahead of the expected rate hike from the Federal Reserve.
The Bank of Canada is scheduled to announce its overnight rate target on January 18, followed by the outlook for the economy and inflation. In this report, the implication of the upcoming job report will absolutely be considered.
On the other hand, the FOMC recently released its minutes from December meeting and the participants agreed that economic activity had been expanding at a moderate pace since midyear, but there were uncertainties raised as Trump takes the office later this month, which weakened the supposedly firm stance of the US dollar.
The members still expect the gradual adjustments in the stance of monetary policy despite the near-term risks to the economic outlook. In this case, the US dollar will resume its dominance against a basket of currencies prior to the three rate hikes on the way.