USD/CAD slumps to fresh low after disappointing US NFP data
- The USD/CAD dropped to a multi-year low as the dollar weakness persisted.
- The pair dropped partly because of the higher crude oil prices.
- It also fell after the US nonfarm payroll data and Canada’s employment numbers.
The USD/CAD slumped to the lowest level since October 2018 as higher crude oil prices and employment numbers boosted interest on the Canadian dollar. The pair is also on track for the third consecutive weekly losses as the dollar sell-off accelerates.
Higher crude oil boosts interest in Canadian dollar
As the fifth-biggest crude oil producer in the world, the Canadian dollar tends to be affected by movement of oil prices. Indeed, the loonie declined to the lowest level since 2016 when oil prices turned negative.
Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.
Today, the USD/CAD is falling as forex investors react to the rising oil prices. The price of Brent is just 35 cents below $50 while the West Texas Intermediate (WTI) has risen to $46.25. In total, the two benchmarks have increased by more than 200% from their YTD low.
The price is rising today after OPEC and its ten allies reached an agreement to boost production by 500,000 barrels in January. This increase is smaller than what countries like the United Arab Emirates (UAE) were proposing. Further, the Covid vaccine has boosted sentiment that demand will come back in the coming year.
US and Canada jobs numbers
The USD/CAD is also falling because of the important job numbers from the US and Canada. In a statement, the US Bureau of Labour Statistics (BLS) said that the American economy added more than 245,000 jobs in November. That was lower than the previous month’s increase of 638,000 and was mostly because of the lockdowns enacted by several states. Economists were expecting the economy to add 469,000 jobs.
At the same time, the unemployment rate fell slightly to 6.7% while wages increased by 4.4%. The participation rate also increased to 62%.
Meanwhile, in Canada, data showed that the country added more than 62,000 jobs in November. That was a smaller increase than the previous month’s increase of 83k. The unemployment rate fell to 8.5% while the participation rate fell to 65.1%.
Still, millions of people in the two countries are out of work and analysts believe that the situation will remain like that for years.
USD/CAD technical outlook
On the four-hour chart, we see that the USD/CAD made a major bearish breakout this week, when it moved below the November 9 low of 1.2924. Today, the pair is trading at 1.2862, which is the lowest it has been since 2018.
The downward trend is supported by the 50-day and 25-day least squares moving averages and the descending trendline that is shown in yellow. The Average Directional Index (ADX) has also surged to 44. Therefore, the pair will likely continue falling, with the next support being at 1.2800.