Two trades to watch: USD/CAD, GBP/USD

USD/CAD looks to US & Canadian jobs data

USD/CAD lacks direction ahead of the jobs reports from the US and Canada.

The loonie has failed to track oil prices higher across the week. Canada’s main export has risen over 6% this week, while the loonie trades roughly flat against its US counterpart.

That said, the BoC’s more hawkish bias compared to the Federal Reserve could keep bears hopeful of further downside.

Attention is now on the NFP and Canada’s jobs report. In October, Canada saw a blowout jobs report with 108.3k jobs created as such, November’s report is expected to be more muted, with just 5k jobs added. Unemployment is due to tick higher to 5.3%, up from 5.2%.

The BoC’s interest rate decision is next week. Inflation is showing signs of slowing. Weakness in the jobs market could fuel hopes of a less aggressive BoC.

Where next for USD/CAD?

USD/CAD has been trending higher over the past two weeks. However, gains have been capped by the 50 sma. Buyers could look for a rise over 1.3515, the October low, to expose the 1.3570 and the rising trendline at 1.3645.

Sellers could look for a fall below 1.3325, the Friday 25 low, to bring into 1.3220, the November low. A fall below here creates a lower low.

GBP/USD rally continues ahead of the NFP

The pound’s rise has been impressive given the dire UK economic outlook. Sterling is capitalizing on the weaker USD. However, it is worth pointing out that the pound is performing well against other major peers.

With inflation at 11.1% and showing few signs of slowing, the BoE could be forced to stick with a more hawkish approach to monetary policy than the Fed, which is set to adopt a more dovish stance from the December meeting.

Attention is now on the US non-farm payroll, which is expected to show 200k jobs were added in November, down from 261k in October and 315k in September.

Unemployment is set to tick higher again to 3.8%, up from 3.7%, and wage growth is set to ticker lower to 4.6%.

Given that Fed Powell has said that the Fed is hiking by 50 basis points in December, the NFP could have a smaller impact than usual on the market. A weak report, or even a goldilocks report of slower wage growth but moderate job creation, could pull the USD lower.

Where next for GBP/USD?

GBP/USD has risen above the 200 sma and is testing resistance at 1.23, the August high. The RSI supports further gains while it remains out of overbought territory. A rise above 1.23 opens the door to 1.2670, the June high.

On the flip side, should sellers successfully defend the 1.23 level, immediate support can be seen at 1.2150, the 200 sma, ahead of 1.20, the psychological level. A move below 1.1740, the mid-November low, could see sellers gain momentum.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.