- USD/CAD is recovering around 50 pips from the more than weekly low reached earlier this Friday.
- Aggressive bets on a Fed rate hike are helping the USD pare some of its heavy intraday losses.
- Disappointing Canadian jobs data weighs on domestic currency and offers support.
- Rising oil prices continue to fuel the craziness and limit the attempted rebound.
USD/CAD pair stages a good bounce from the 1.2980 region or above the weekly low touched this Friday, although it remains in negative territory for the third consecutive day. The pair is trading near the 1.3025 region during the early North American session, still down nearly 0.50% on the day.
Expectations that the Federal Reserve will tighten its monetary policy at a faster pace are helping the US dollar pare some of its heavy intraday losses to a fresh one-month low. The Canadian dollar, on the other hand, is being undermined by disappointing domestic employment data. This in turn offers some support to the USD/CAD pair and contributes to an intraday recovery of more than 50 pips.
Statistics Canada reported this Friday that the number of people employed fell by 39,700 in August, compared to expectations for an increase of 15,000. Further details of the publication revealed that full-time employment fell by 77.2 thousand Unemployment rate rose from 4.9% in July to 5.4% during the reporting month. However, this was offset by a strong rally in oil prices.
Against the backdrop of a token production cut by OPEC+, Russia’s threat to cut oil flows to any country that upholds a price ceiling on its oil is raising concerns about tight global supplies. Rising oil prices offer support to the black liquid underlying the commodity-linked frenzy amid the hawkish Bank of Canada. This, in turn, prevents any further recovery in the USD/CAD pair.
Additionally, markets appear to have already fully priced in an excessive 75 basis point rate hike at the next FOMC meeting on September 20-21. That, along with muted action around US bond yields, could hold back USD bulls from placing aggressive bets. Therefore, it will be wise to wait for a strong subsequent buy before placing on any further appreciating movement of the USD/CAD pair.
In the absence of any relevant economic news from the US, the planned speeches by Fed officials will play a key role in influencing USD demand. In addition, oil price dynamics will be monitored to seize short-term trading opportunities. However, the USD/CAD pair remains on track to record heavy weekly losses and snap a four-week winning streak at 1.3200-1.3210.