USD/CAD eases from 17-month tops, still well bid above 1.3400 mark post-data/Poloz

06 Dec 2018

   •  The USD drifts into negative territory on softer employment reports.
   •  Weaker oil prices continue to weigh on Loonie and helped limit losses.
   •  Dovish BoC comments sets the stage for additional near-term gains.

The USD/CAD pair trimmed a part of its early strong gains to 17-month tops and has now retreated to the 1.3400 neighborhood post-US/Canadian macro releases.

Data released on Thursday showed that the US private sector employers added 179K new jobs in November, lower than 195K expected and worse than previous month's 225K.

The US Dollar extended its intraday retracement slide and weakened farther below the 97.00 handle in reaction to another disappointment from initial weekly jobless claims.

However, a combination of factors, including a larger than expected rise in the Canadian trade deficit, continued weighing on the Canadian Dollar and helped limit any deeper retracement, at least for the time being.

Adding to this, a fresh leg of a downfall in crude oil prices on Thursday, despite the expected OPEC+ deal to cut oil output, dampened demand for the commodity-linked currency - Loonie and extended some support.

The Canadian Dollar was further dragged lower by some dovish comments from the text of the scheduled speech by BoC Governor Stephen Poloz, saying that the current level of rates is appropriate for the 'time being'.

This, against the backdrop of the overnight bearish BoC monetary policy statement, hinting at downward revisions to its growth and inflation forecasts, should remain supportive of the pair's recent upsurge.

Technical levels to watch

A follow-through buying beyond the 1.3445-50 region now seems to accelerate the up-move and assist the pair to aim towards reclaiming the key 1.3500 psychological mark. On the flip side, any meaningful retracement below the 1.3400 handle now seems to find decent support near the 1.3360-50 region, which if broken might prompt some additional long-unwinding trade and drag the pair further towards the 1.3320-15 zone.

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