Canadian Dollar takes a cautious step higher in choppy post-NFP Friday markets

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  • The Canadian Dollar follows a broad-market risk bid to higher ground on Friday.
  • Economic data from Canada is thin on Friday, as well as all next week.
  • Crude Oil takes a little off the top, paring back recent losses and helping to prop up the CAD.

The Canadian Dollar (CAD) is up on Friday, gaining ground across the FX board. Still, gains are thin and the charts remain choppy as investors readjust their positions and expectations after the US Nonfarm Payrolls (NFP) for November surprised to the upside. At the time of writing, the CAD is up a scant tenth of a percent on the day against the US Dollar (USD), while the Loonie’s strongest performance is against the Kiwi (NZD), climbing about seven-tenths of a percent.

Canada brought little significant economic data on Friday, and the same rings true for next week with next to nothing on the calendar docket for the CAD until next Friday’s appearance from Bank of Canada (BoC) Governor Tiff Macklem. BoC Governor Macklem is expected to answer audience questions after speaking at the Canadian Club of Toronto.

Daily Digest Market Movers: Canadian Dollar in the green for Friday despite rough ride from US NFP

  • The Canadian Dollar is up across the broader FX market on Friday, gaining ground against every other major currency, with the US Dollar taking a tight second place.
  • The US Dollar climbed ahead of Friday’s US Nonfarm Payrolls before falling back post-release.
  • US November NFP figure beats expectations on Friday, coming in at a hair under 200K, well above the forecast for 180K and clearing further ground above October’s 150K showing.
  • Despite the swing in risk sentiment after a better-than-expected NFP print, investors will be keeping a close eye on recent figures heading into 2024 and be on the lookout for revisions.
  • Of the last twelve consecutive NFP releases, all but four have been revised lower after the fact. Of the four, only two were revised higher; the two most recent prints have yet to fall under the red pen’s stroke.
  • The University of Michigan’s Consumer Sentiment Index also came in well above expectations, printing at 69.4, well above the forecasted 62.0 and climbing even further above November’s print of 61.3.
  • Next week brings US Consumer Price Index (CPI) inflation figures as well as the Federal Reserve’s (Fed) final Interest Rate Decision, and markets will be keen to see what updates are made to the Fed’s ‘dot plot’ of interest rate projections.
  • Crude Oil is seeing a moderate bounceback after declining through most of the week. West Texas Intermediate (WTI) Crude Oil has climbed back to $71.50 per barrel on Friday after declining nearly 8% from Monday’s opening bids, falling to $69.01 per barrel on Thursday.
  • A rebound in Crude Oil, even a thin one, is a welcome bump for the Canadian Dollar, which is still down eight-tenths of a percent against the US Dollar from Monday’s open.

Canadian Dollar price today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the US Dollar.

USD   0.28% 0.27% -0.10% 0.21% 0.39% 0.58% 0.54%
EUR -0.27%   0.01% -0.37% -0.07% 0.11% 0.29% 0.28%
GBP -0.27% 0.00%   -0.39% -0.07% 0.11% 0.29% 0.28%
CAD 0.12% 0.39% 0.40%   0.30% 0.51% 0.68% 0.66%
AUD -0.19% 0.09% 0.08% -0.31%   0.20% 0.37% 0.36%
JPY -0.38% -0.09% -0.10% -0.50% -0.22%   0.19% 0.17%
NZD -0.57% -0.29% -0.29% -0.69% -0.37% -0.18%   -0.02%
CHF -0.53% -0.26% -0.27% -0.67% -0.35% -0.16% 0.01%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Technical Analysis: Canadian Dollar looking for gains on Monday, USD/CAD hampered by 1.3600

The USD/CAD saw some back-and-forth action on Friday, pointing to 1.3550 before rallying back towards the 1.3600 handle. Intraday action is getting squeezed into the midrange, with technical support coming from the 200-hour Simple Moving Average (SMA) near 1.3570.

Bullish momentum looks set to stall after a bounce from the 200-day SMA just above the 1.3500 handle, and daily candles have been closing in the middle for the back half of the trading week.

A bullish break will take the USD/CAD back toward the 50-day SMA near 1.3700, while a downside retest of the 200-day SMA will clear the way for another bearish run at September’s swing lows into 1.3400.

USD/CAD Hourly Chart

USD/CAD Daily Chart

Nonfarm Payrolls FAQs

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.