Forex - USD/CAD weekly outlook: January 7 - 11

Investing.com - The Canadian dollar turned higher against the U.S. dollar on Friday after data showing that the Canadian unemployment rate dropped to a four-year low in December bolstered the outlook for the Canadian economic recovery.

USD/CAD hit 0.9922 on Friday, the pair’s highest since December 31; the pair subsequently consolidated at 0.9867 by close of trade, down 0.94% for the week.

The pair is likely to find support at 0.9835, the low of January 2 and resistance at 0.9922, Friday’s high.

Statistics Canada said the Canadian economy added 39,000 jobs in December, well above expectations for a 5,000 rise, after a stronger-than-forecast 59,300 increase in November, while the unemployment rate dropped to 7.1% from 7.2%.

Meanwhile, the closely watched report on U.S. nonfarm payrolls indicated that the recovery in the labor market may be moderating.

The U.S. Department of Labor said the economy added 155,000 jobs in December, slightly higher than forecasts for an increase of 150,000, but easing from an upwardly revised increase of 161,000 in November. The unemployment rate held steady at 7.8%.

The greenback pushed higher against the Canadian dollar on Thursday after the minutes of the Federal Reserve’s December policy meeting showed that some policymakers considered an earlier-than-expected end to the bank’s quantitative easing program.

The Fed’s December minutes said also interest rates would remain close to zero “at least as long” as the jobless rate remains above 6.5%.

Investors remained cautious as relief over an agreement to avoid the U.S. fiscal cliff was offset by concerns about continuing political wrangling over further spending cuts and raising the U.S. debt ceiling.

In the week ahead, investors are likely to remain focused on U.S. fiscal negotiations, while monetary policy decisions by the European Central Bank and the Bank of England will also be in focus.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, January 7

Canada is to publish the Ivey purchasing managers’ index, a leading indicator of economic health.

Tuesday, January 8

The U.S. is to release private sector data on economic optimism, as well as official data on consumer credit, which is closely linked to consumer spending.

Wednesday, January 9

The U.S. is to publish official data on crude oil inventories, while the U.S. Treasury is to hold an auction of 10-year government bonds.

Thursday, January 10

The U.S. is to publish the weekly government report on initial jobless claims.

Friday, January 11

Canada is to release official data on the trade balance, the difference in value between imports and exports, while the U.S. is also to round up the week with government data on the trade balance.