Loonie Rises on Positive Trade and Employment Figures

Loonie Rises on Positive Trade and Employment Figures

 
The implementation of crude oil production cut by OPEC and other oil producing nations, and general perception about the Greenback as an overbought currency pushed the USDCAD lower to 1.31767 in the first week of January 2017. While some speculators were expecting the USDCAD to rise back to a level of 1.3570 in the days ahead, the recent economic data and commodity prices suggest that the downtrend is not yet over. We hereby provided the details for our bearish view of the USDCAD pair.

Last week, the crude hit a high and low of $55.23 and $52.13 respectively. The commodity closed the week at $53.70. This indicates that crude oil is currently consolidating a $53 levels and there is a high probability of further rise in the crude oil price. The argument is also strengthened by the fact that the US inventories declined by 7.1 million barrels, compared with market’s expectation of a decrease of 1.8 million. A decline in the inventories boosts the price of crude oil and vice-versa. Higher crude price benefits Canadian economy and, in the process, strengthens the Loonie.

The Statistics Canada reported that the number of jobs added to the economy increased to 53,700 in December, compared with 10, 700 reported in the previous month. Analysts expected the Canadian economy to lose as many as 5,100 jobs in December. The overwhelmingly positive employment change is expected to keep the Canadian dollar strong.

The Statistics Canada also announced a positive balance of trade for November 2016. The institution stated that the country had a trade surplus of $0.5 billion, against the market’s expectation of a deficit of 1.6 billion. In October, the country had deficit of $1.0 billion.

On the contrary, the US Bureau of Labor Statistics reported a lower than anticipated employment change in December. Only 156,000 jobs were added, against the market’s expectation of an addition of 175,000 jobs. In November, the US economy added an upwardly revised 204,000 jobs.

Likewise, the US Bureau of Economic Analysis reported that the trade deficit widened to $45.2 billion in November, compared with a deficit of $42.4 billion in the previous month. The economists were expecting a deficit of $42.2 billion only. Thus, mixed economic data is likely to keep the US dollar weak against the Canadian dollar in the week ahead.

The USDCAD pair faces resistance at 1.3350. The negative reading of the MACD indicator suggests that the USDCAD pair will likely continue to move downwards.

USDCAD - Technical Analysis - 9th January 2017

So, it would be safe for a Forex trader to go short in the USDCAD pair near 1.3250, with a stop loss order above 1.3320. The short position can be winded when the pair falls to a low of about 1.3120.

A binary trader can contemplate on purchasing a low or below contract when the USDCAD pair trades near 1.3250. With an expiry period of one week, the trader has higher chances of finishing the put option trade in the money.


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