The Canadian dollar is trading sideways in Monday trade. Currently, USD/CAD is trading at 1.3240, down 0.09% on the day. On the fundamental front, Canadian Housing Starts were almost unchanged at 201 thousand, edging above the forecast of 200 thousand. Building permits declined by 1.5%, well off the estimate of +3.5 percent.
Canadian Dollar Dips on Soft Job Numbers
Last week was busy for the Canadian dollar. The currency dropped below 1.32 and touched a 1-month high on Thursday, but reversed directions on Friday and lost ground. USD/CAD took advantage as Canadian employment numbers sagged, while U.S. nonfarm payrolls were much stronger than expected.
In Canada, November employment numbers were dismal. Employment fell by a remarkable 71.2 thousand, its worst decline since January 2018. Analysts had expected a gain of 10.0 thousand. The unemployment rate jumped to 5.5%, up sharply from 5.5% a month earlier.
In the U.S., the week ended with an excellent nonfarm payrolls report. The U.S. economy added an impressive 266 thousand jobs in November, crushing the estimate of 181 thousand. As well, the 3-month average payroll number increased from 189K to 205K. Recent nonfarm payrolls releases have been soft, due to the recent strike at General Motors. The November figure was much higher, as the striking workers went back to work in October and were accounted for in the November report. Wage growth remained steady at 2.0%, but fell shy of the forecast of 0.3%. There was more positive news on the consumer front, as UoM Consumer Sentiment surged to 99.2 in December, up from 95.7 in November.
OPEC Agrees to Lower Production
Last week’s OPEC meeting ended with an announcement that an agreement had been reached to lower production, effective January 1. A reduction in output is aimed at curbing the worldwide glut of crude and stabilizing oil prices. At the same time, some OPEC members are notorious for failing to adhere to their production quotas, and if the new agreement is not honored, oil prices could head lower. Canada is a major oil producer, so the Canadian dollar is sensitive to movement in oil prices.
USD/CAD posted considerable gains on Friday, as the pair broke through resistance at 1.3200 and 1.3230. Note that the EMA lines immediately follow, with the 50-EMA at 1.3234 and the 200-EMA at 1.3239. Is a crossover imminent? If the 50-EMA crosses above the 200-EMA, it would be a bullish sign for USD/CAD (“golden cross”). Back in mid-October, the 50-EMA broke below the 200-EMA, and the pair responded with a downturn.
EUR/GBP is trading sideways in the Monday session. Currently, the pair is trading at 0.8419, up 0.05% on the day. EUR/GBP is coming off a rough week, losing 1.1 percent. The pair has dropped to its lowest level since May 2017, as investors continue to favor the British pound ahead of the U.K. election.
EUR/GBP is putting pressure on support at 0.8400. This major level has held since May 2017, so a breakout below this line would be a major development. Below, there is support at 0.8350. On the upside, 0.8500 has some breathing room as EUR/GBP continues to head lower.
This article was originally posted on FX Empire
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