The USD / CAD pair to watch on forex at the start of 2022


Currency pair of the week »USD / CAD

The United States and Canada are releasing employment reports this week. OPEC + is also meeting this week, which could move the price of oil, potentially affecting the Canadian dollar on forex.

Last month, the US Federal Reserve announced that it would double the pace of its reduction in its bond buying program, which will now end in March. Additionally, FOMC members noted that they saw 3 rate hikes in 2022 and 3 rate hikes in 2023! The outcome of the meeting was mainly due to the surge in inflation, which was last reported at 6.8% for November. This week traders will get the latest snapshot of employment data as the US releases nonfarm wages for December. 400,000 new jobs are expected to be added to the economy after being severely disappointing the previous month, adding only 210,000 jobs. Average hourly earnings are expected to increase to 0.4% month-on-month and the unemployment rate is expected to decline to 4.1%. The Fed should be comfortable with this data if it’s online, but there is always the risk that the impression will be lower due to the Omicron variant of the coronavirus.

Central banks: take off in perspective?

At the beginning of December 2021, the Bank of Canada left interest rates unchanged at 0.25% and maintained their forecast after ending their bond buying program the previous meeting. They indicated that inflation would remain high for the first half of 2022. A few days later, inflation for November was released at 4.7% year-on-year. Canada will release Job Change for December on Friday. Expectations are at +27,500 after a meteoric impression of +153,700 for November (made up of almost half of full-time jobs and half of part-time jobs). The unemployment rate is expected to remain unchanged at 6%.

In addition to the employment reports for the US and Canada this week that could affect the USD / CAD forex pair, OPEC + is meeting on Tuesday. After a tough decision at their December meeting to increase production by 400,000 barrels per day, OPEC + is expected to do the same this week. While there may be a pullback in global manufacturing, it should be brief. Therefore, the future demand should be there. In addition, countries that have freed oil from their reserves, such as the United States, United Kingdom, China and South Korea, among others, will need to restock at some point. This will further increase the demand. With the price of crude oil in the mid-1970s, OPEC should be happy to increase supply. Why is the OPEC + meeting so important for the USD / CAD pair? As an oil-exporting country, the price of the Canadian dollar is highly dependent on the oil price. Therefore, an increase in oil production can lower the price, thereby raising the price of the USD / CAD pair.

The USD / CAD price broke out of a downward wedge in June 2021 at 1.2340 and returned to near the 38.2% Fibonacci retracement level from March 2020 highs to June 2021 lows, hitting a low high of 1.2949. The price then retreated, creating a second downward wedge. After breaking higher on October 22, 2021 near 1.2350, the USD / CAD pair rebounded and tested the previous high, pulling it off a few pips and hitting a new high at 1.2964. The price then returned to the 50-day moving average near 1.2655 and so far has held steady. Will the USD / CAD pair form another higher low and move north on the forex?

Daily USD / CAD Chart

Source: Tradingview, Stone X

On the 4 hour chart, not only did the 50 day moving average support for the USD / CAD pair, but the 1.2600 / 1.2625 level also provided support. 1.2626 is the 50% retracement from December 8, 2021 lows to December 20, 2021 highs. Additionally, 1.2605 is the 38.2% Fibonacci retracement from October 21, 2021 lows to December 20, 2021 highs. that the RSI was diverging in oversold territory, an indication that the price may be ready to rise. There is a significant resistance level at 1.2765-1.2790 which consists of horizontal resistance and a trendline going back to October 27, 2021. Above there previous highs are at 1, 2847 and 1.2964. Support is at Friday low at 1.2606, ahead of previously mentioned support levels. Below 1.2606 is the 61.8% Fibonacci retracement level, from December 8 lows to December 20 highs at 1.2546.

USD / CAD 4 hour chart

usd / cad forex 03012021
Source: Tradingview, Stone X

The United States and Canada are releasing employment reports this week. OPEC + is also meeting this week, which could move the price of oil, potentially affecting the Canadian dollar. Therefore, the USD / CAD pair has the potential for good volatility in the forex this week.

By Joe Perry, Forex.com » Official site

forex.com 970x250

Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or a solicitation to buy or sell forex foreign exchange contracts or CFDs. Although the information contained in this document has been taken from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages that may result from the fact that someone relies on such information.

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