The Canadian Dollar took a significant hit on Friday, tumbling by nearly nine-tenths of a percent and sliding back towards recent lows. The currency was buffeted by a mix of data from both the US and Canada that led investors to adopt a more cautious approach.
In November, both countries witnessed job additions that surpassed expectations. However, the unemployment rates in both regions also witnessed an upward tick on a monthly basis. Canada, in particular, experienced a remarkable increase in jobs, adding nearly twice as many as forecasted and reaching a seven-month high in monthly job growth. But this positive job growth was overshadowed by the Canadian Unemployment Rate surging to its highest level in over three years. This sharp rise shattered investor confidence in the Loonie as the trading week came to a close.
Adding to the Canadian Dollar’s woes was the broader market shift back towards the safety of the US Dollar following the release of the US November Nonfarm Payrolls (NFP) report. As a result, traders pushed the USD/CAD pair to its highest bids in almost five years, positioning it for its highest daily close since May of 2020.
In the daily digest of market movers, the Canadian Dollar lost nearly a full percent on Friday, while the US Dollar rallied across various currency pairs. The USD/CAD pair climbed north of 1.4150. Canada added 50,500 net new jobs in November, well above the expected 25,000 and showing a significant increase from October’s 14,500. Despite the boost in new jobs, the Canadian Unemployment Rate jumped to 6.8%, higher than the forecasted 6.6% and the previous month’s 6.5%. Additionally, Canadian Average Hourly Wages declined sharply, dropping to 3.9% year-on-year from the previous period’s 4.9%.
On the US side, the NFP rebounded firmly in November, rising by 227,000 compared to the forecasted 220,000 and recovering from October’s revised 36,000. The US Unemployment Rate also rose to 4.2% as expected, edging up from 4.1% in the previous month.
Looking at the Canadian Dollar’s price forecast, Friday’s plunge of the Loonie and the corresponding surge of the US Dollar have propelled the USD/CAD pair to its highest daily close since May 2020, with bids strengthening in chart territory above 1.4150. A recent upward movement into this region previously failed to result in a bullish close above the near-term consolidative highs, suggesting that short positions on the Canadian Dollar have effectively pushed into new ground, capping off what was otherwise an uneventful trading week.
The USD/CAD pair has now risen around 7% for the year and has gained 1.1% in December alone. If the current market dynamics continue to favor higher bids, the pair is set to close in the green for a fourth consecutive month.
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