The USDCAD prices moved lower during the course of trading yesterday more as a correction to the latest bull move up rather than as a reaction to the events in the US. This correction led the prices to the 1.28 region from where we have seen a small bounce as of this writing as the market awaits the NFP.
USDCAD Corrects Lower
Yesterday, there was not much data from Canada but the US session saw the announcement of the new tax plan as well as the appointment of Powell as the next Fed Chair who would succeed Yellen in February 2018. The tax reform plan did not hold too much of a surprise as most of the data were already out in the public domain and hence there was nothing new in the plan that was released. Also, the appointment of Powell was also not a surprise to the markets as the reports were out even a couple of days earlier.
The muted reaction of the markets and the dollar to the appointment also made it clear that irrespective of who the next Fed Chair is going to be, the rate hikes would depend more on the incoming data rather than the Fed members. That is the reason why the employment data from the US and Canada is likely to assume significance. If we see some strong data from the US, that would confirm the rate hike in December which is then likely to spur the dollar to push towards the 1.30 region in this pair.
Looking ahead to the rest of the day, expect some consolidation and ranging till the release of the employment data as the traders begin to position themselves for the big news. The data release is likely to be followed by a lot of volatility and hence it is important for the traders to ensure that their risks are minimal and new traders would do well to avoid trading at such times.
This article was originally posted on FX Empire
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