The Canadian dollar, also known as the Loonie, traded flat against the greenback on Thursday, last spotted at 1.26.
The USD/CAD pair rose from 1.23 in the middle of October to the current levels, boosted by the soaring USD (as traders priced in more rate hikes in 2022) **and falling oil prices **(as the WTI benchmark posted a multiple top pattern at 85 USD and dropped below 78 USD today)
Canadian data in focus
Despite the Canadian ADP report surpassing market expectations, today’s data failed to move the USD/CAD pair. According to this metric, the domestic economy created 65,800 new jobs in October, up from 41,000 in September.
On Wednesday, the core CPI inflation in Canada ticked higher to 3.8%, up from 3.7% previously , against expectations of a decline to 3.5%.
Headline CPI inflation did accelerate to 4.7%, from 4.4% previously . It keeps pressure on the Bank of Canada to continue normalizing policy after bringing QE to an end last month. The BoC has brought forward plans for the first-rate hike to Q2 2022, and risks are skewed in favor of an even earlier hike next year.
Therefore, economists at MUFG Bank expect recent Canadian dollar weakness to prove short-lived.
Economists at ING share the same view. They believe that the bright outlook of the Canadian economy is set to fuel the Canadian dollar.
They said regarding the Canadian dollar.
In the US, jobless claims printed 268,000, down from 269,000 previously but above the 260,000 expected. Continuing claims improved notably to 2.08 million. Additionally, the Philadelphia Fed Manufacturing Survey jumped to 39 in November, well above 23.8 scored in October.
The next resistance is seen at 1.27, while the critical selling area is expected near the summer tops in the 1.28 zone. Bears must defend this area. Otherwise, the medium-term trend could change to bullish, targeting 1.30.
Alternatively, the support could be at 1.25, where the pair stopped this week. While above it, the short-term outlook seems bullish.