USD/CAD rises to fresh 1-month highs near 1.2600 ahead of employment reports

The US dollar is the best performer of the American session while the Loonie is among the worst. USD/CAD broke above 1.2550 and extended gains. 

USD/CAD: up 500 pips from Sep lows 

US and Canadian economic data boosted the pair further to the upside. Not even a rally in crude oil prices managed to cap the upside. U

US initial claims came in at 260K (against expectations of 265K), factory orders rose 1.2% (vs 1.0%) while in Canada, August’s trade balance figures showed a wider than expected deficit of $3.41 billion. 

Despite the slide of the Loonie after the data, analysts from RBC affirmed: “On balance, today’s data adds to the evidence that the outsized outperformance of the economy over the last year is coming to an end. It also, however, does not alter our expectation that growth will still remain at an ‘above-potential’ pace and — with the economy probably already quite close to capacity limits — that further gradual Bank of Canada interest rate hikes will be warranted”.

The West Texas Intermediate is up 1.50% above $50.50 a barrel but the CAD ignored completely its performance. What appears to be affecting the pair is the higher spread between US and Canadian bonds. Today two FOMC members, Williams and Harker signaled support for another rate hike before the year-end.

From the fundamental perspective, tomorrow the key events will be the employment reports from US and Canada. Both will be released at 12:30 GMT. The numbers could challenge the current USD/CAD trend or boost it further. From the lows of September, the pair has risen more than 500 pips and it is headed toward the fourth weekly gain in a row. 

LIVE NFP: 138th Non-Farm Payrolls Coverage

USD/CAD levels to watch 

The pair peaked recently at 1.2585, the highest since August 31. Above, resistance levels might be seen at 1.2600 and 1.2665 (Aug 31 high). On the flip side, support might lie at 1.2535/40 (Oct 3 high), 1.2495 (Oct 4 high) and 1.2445 (Oct 4 low).