Canadian Dollar declines after September US JOLTS

Canadian Dollar declines after September US JOLTS

USD/CAD holds its position above src.3900, close to its three-month high recorded on Monday.
Oil prices fall sharply as limited military operations alleviate fears of an all-out war in the Middle East.
US Dollar strengthens as strong housing figures seem to outshadow soft JOLTs data.

The USD/CAD pair continues to gain traction on Tuesday with the quote rising by 0.23% to src.39src0 at the time of writing. The pair is trading near its three-month high of src.3908 recorded on Monday and has been supported by a combination of factors, including the USD’s strength and a decline in oil prices.

The Greenback has been strengthening in recent weeks on the back of positive economic data, which has bolstered expectations for interest rate cuts by the Federal Reserve (Fed) in November. US JOLTs data from September came in mixed but somewhat below consensus. On the other hand, several home price indices from August beat expectations, demonstrating continued strength in shelter inflation.

Daily digest market movers: Canadian Dollar pressured by lower Oil prices

WTI Oil price hovers around $67.50, weighing on the commodity-linked CAD as Canada is a major oil exporter.
Iran’s response to Israeli military actions could further impact oil prices and CAD. However, the lack of response to Israel’s weekend missile strikes has reduced market anxiety.
BoC Governor Macklem explains that the recent aggressive rate cut was justified, considering previous inflation-fighting hikes.
BoC aims to find the neutral rate that balances economic stimulation and restraint.
On the US side, JOLTS Job Openings declined to 7.44 million in September, falling short of market estimates. Hires and total separations in the US economy remained stable, while quits and layoffs showed minimal changes.
Markets await the Nonfarm Payrolls report from September to be released on Friday. Gross Domestic Product (GDP) revisions on Wednesday will also be important.

AUD/USD technical outlook: Bullish momentum steady despite overbought RSI

The Relative Strength Index (RSI) is currently at 79, indicating that the pair is heavily overbought. The RSI’s slope is rising sharply, suggesting that buying pressure is rising. The Moving Average Convergence Divergence (MACD) is green and rising, suggesting that buying pressure is increasing. The overall technical outlook is bullish, but a correction is still possible.

Key support levels are at src.3870, src.3850 and src.3830, while resistance levels are at src.3900, src.39src5 and src.3930.

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.

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