Improving the risk appetite in the recent few days could help the Canadian dollar to add more gains versus the greenback with rising back of the oil prices after it had been under pressure on increasing worries about the US growth outlook which can effect negatively on the Canadian exports of commodities and oil to US.
From another side, The Canadian dollar has been well-supported too by the strong rising of IVEY PMI to 63.4 in September which followed another strong rising in August to 57.6 after a sudden falling In July to 45.1
The Canadian dollar has been under pressure versus the greenback with the persisting of the European debt crisis which has dampen the market sentiment increasing the demand for the greenback as a safe haven with continued worries about the European banks exposure to the Greek debt leading USDCAD to reach 1.0655 but with rising hopes for recapitalizing the European banking sector by EU and also growing optimism about the US labor market, it has eased back without breaking its previous resistance at 1.0669 but it has found difficulty to get below 1.0364 again which has become supporting level after it has been a resistance before breaking it 29th of September but with the release of September Canadian labor report, it could get below it as the report has shown rising of the Canadian net change employment by 60.9 jobs while the markets were waiting for rising by just 19.5 after falling by 5.5k in August and also decreasing of the Canadian unemployment rate to 7.1% in September while the markets were waiting for 7.3% as the same as August.
God willing, USDCAD can face now in the case of further declining a new supporting level at 1.0142 then the parity psychological level and the breaking of it too can open the way for further falling to 0.9788 again while rising back again can be met with resistance at 1.0669 again then 1.0855 and the breaking of it can lead to 1.1 psychological level and the breaking of it too can lead to another higher resistance at 1.1123
God willing, the market is waiting now for the release of US labor report of September which is expected to show rising of the US non-farm payrolls by 73K after no change in August and the report is expected to show also that the Unemployment rate is still steady at 9.1% as it was in August and also the average hourly earnings rinsing by 1.9% y/y as august with steadiness of the average weekly hours at 34.2
And this report comes after triggered optimism in the markets by the release of Sep US ADP employment index which has come with new 91k while the market was waiting for just 70k from 89k in August and also after yesterday release of US Initial jobless claim which came at 401k while it was forecasted to rise to 411k from 395k a week earlier.
FX Market Strategist
Walid Salah El Din