Canadian dollar ends slide, Powell next

The Canadian dollar has posted slight gains on Wednesday. In the North American session, USD/CAD is trading at 1.3541, down 0.28%.

Will Powell’s speech be a market-mover?

All eyes are on Fed Chair Powell, who will deliver a speech later today at the Brookings Institute in Washington. The fact that Powell’s remarks are the center of attention is an indication that market movement has become very dependent on rate policy. The Fed is expected to ease up on its pace of rates at the December meeting and deliver a 50-bp hike, after back-to-back increases of 75 bp. Still, the markets haven’t excluded the possibility of another 75 bp move. Investors are hoping to glean some clues from Powell as to when the Fed plans to wind up the current tightening cycle.

After the US inflation report underperformed, the markets climbed sharply and the US dollar sagged on speculation of a dovish pivot from the Fed. This exuberance didn’t last long, as one Fed member after another sent out a hawkish message, warning that inflation was not yet beaten and the rate hikes would continue. There is some uncertainty as to when the Fed funds rate will peak, with most forecasts projecting a range between 4.75%-5.25%.

The Canadian dollar has just ended a nasty slide which saw it lose almost 300 points. We could see further volatility on Friday, when both Canada and the US release employment reports. The ADP payrolls report, released today, showed a small gain of 127, 000 jobs, down from 239,000 and shy of the consensus of 200,000. The report is not considered an accurate indication for nonfarm payrolls on Friday, and the ADP recently changed its methodology, which raises further questions about its accuracy. The forecast of nonfarm payrolls is 200,000, which would be a significant drop from the previous reading of 261,000.

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USD/CAD Technical

• USD/CAD tested support at 1.3576 earlier. Below, there is support at 1.3478
• There is resistance at 1.3656 and 1.3782

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