USD/CAD hovers around 1.2600 on good US ADP data

  • The greenback recovers from four consecutive day losses against the Canadian dollar.
  • The market sentiment is a mixed bag, boosts the US dollar.
  • Falling oil and energy prices weaken the Canadian dollar rise against the buck.

After posting four days-in-row losses, the USD/CAD is barely advancing 0.03%, trading at 1.2586 during the American session at the time of writing.

The market sentiment has been dismal throughout the day. Surging oil and gas prices, US political uncertainties, and central banks tightening monetary policy kept investors nervous. 
However, as the New York session progresses, it seems that the market sentiment is showing some improvement. Recent news regarding the US Republican Senator McConnell, who leads Republicans hit the wires with a plan to propose a short-term solution to the debt-ceiling crisis.

The market reaction to that news piece was positive. The S&P500, the Dow Jones Industrial, and the Nasdaq trimmed their losses, are gaining 0.13%, 0.05%, and 0.43%, respectively.

Western Texas Intermediate (WTI) crude oil, which strongly correlates with the Canadian dollar, is down almost 2% and is trading at $76.88, weighing on the USD/CAD pair. Further exerting additional pressure on the pair is the US Dollar Index, which tracks the greenback’s performance against its peers, is advancing 0.28%, sitting at 94.24.

US ADP Employment Change smashed analysts expectations

On the US macroeconomic front, the ADP Employment Change for September increase to 568K, better than the 428K  foreseen by analysts. According to Nela Richardson, chief economist at ADP, the labor market recovery is progressing despite a slowdown from the 748K job pace in Q2. Further, she added that labor shortages should fade as health conditions tied to the COVID-19 variant improve.

The report seems to be in sync with the Federal Reserve Chair Jerome Powell regarding the labor market. However, it usually deviates from the Nonfarm Payrolls reading, leaving investors guessing about its validity.

On Friday, the US economic docket will feature the Nonfarm Payrolls report. The market expects the creation of K new jobs in the economy. If the outcome is achieved, investors could expect a bond tapering announcement at FOMC’s November meeting.

KEY ADDITIONAL LEVELS TO WATCH

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