USD/CAD exchange rate trades in a tight range after Canada’s labour market report failed to spark a reaction. The pair could continue to consolidate at current levels ahead of the upcoming Bank of Canada (BoC) monetary policy decision on Wednesday and as the Relative Strength Index (RSI) rebounds from oversold territory.
The Canadian labour market report showed the pace of new hires slowed in August. Canada added 245,800 jobs last month, analysts had been expecting 250,000 new hires. This is down from July’s 418,500 jobs added. USD/CAD looks to be reversing course ahead of the January low (1.2957).
Whether the Employment data release will influence the Bank of Canada (BoC) remains to be seen. The increase in full-time positions (205.8K) is now happening at a faster clip, out pacing improvements in part-time employment (40.0K). This is an encouraging sign and the central bank may use this to adopt a wait and see mode in September, particularly after updating Monetary Policy Report (MPR) in July.
By keeping policy unchanged, the BoC could be hinting at limited changes to the policy path going forwards, especially as the central bank expects the economic recovery to slow. With the BoC Governor pledging to support the Canadian economy throughout the coronavirus crisis, the central bank could keep its large scale asset purchase programme at a pace of $5 billion a week.
No changes from the BoC could mean that current market trends remain in place, especially as the Federal Reserve has shown that they are in no rush to normalise monetary policy. Crowding behaviour in the greenback could well continue despite sell signals emerging in the DXY index.
