Last week the pair made a brutal downwards move of 1.71% due to mostly the US dollar weakness and the strong Canadian employment data reports.
The Canadian GDP, released monthly, slowed to a 0.8% in September, as the economic recovery may have run out of steam due to the pandemic. On the other hand, Canadian job numbers for November surprised positively. The economy created 62.1 thousand jobs, challenging the consensus of 22 thousand. The unemployment rate fell to 8.5%, down from 9% previously.
The manufacturing sector in the US continued to grow, as the ISM Manufacturing PMI came in at 57.9, although this was weaker than the previous release of 59.3 points. The ISM Services PMI fell to 55.9, down from 56.6 points.
Interestingly, we did not get any headlines yet of a stimulus deal that everyone seems to be waiting on. As US equities pose near all-time-highs, even with optimism driven by Covid-19 vaccines, confirmation of a stimulus program continues to wait as Congress volleys details of how that program might ultimately look.
Next week, traders will be looking at the below economic announcements:
Monday, 17:00, Ivey PMI: The PMI was almost unchanged in October, at 54.5 points. The index has now been in expansionary territory for five straight months. We now await the November data.
Wednesday, 17:00, BoC Rate Decision: The Bank of Canada holds its monthly policy meeting, with policymakers likely to maintain rates at 0.25%. Canada has posted some concrete data lately, and positive news from the rate statement could boost the Canadian dollar.
Friday, 15:30, Capacity Utilization Rate: This indicator has slowed over the past four quarters and fell to 70.3% in the second quarter. This was the lowest figure since 2010. Will we see an improvement in Q3?
On the 4-hour chart, we can see that the pair made major bearish breaches last week, as it dropped below the November 9th low of 1.2925. The bearish trend is supported by the moving averages of the 50-day and 25-day squares and the descending trend line that is shown in yellow. Therefore, the pair is likely to continue to fall, with the next support level at 1.2750.
We remain bearish as the last weeks momentum looks strong.
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