Job Stability and Inflation Trends Impact Canadian Economy

In Canada, job vacancies remained stable in October, following five consecutive monthly decreases from May to September, according to Statistics Canada. Unfilled positions hit their lowest level since February 2021. Total labor demand, the sum of filled and unfilled positions, slightly decreased in October from its peak in March 2023. The unemployment-to-job vacancy ratio in October was unchanged from September but up from 1.3 in March and April. Before the onset of the COVID-19 pandemic in 2019, the ratio fluctuated between 2.0 and 2.3.

Canada's annual inflation rate unexpectedly stayed at 3.1% in November, leading some to reconsider predictions of when the Bank of Canada might cut interest rates. In November, food prices rose by 4.7%, slowing from October's 5.4%, while energy prices fell 5.7%. Excluding food and energy, prices increased by 3.5% year-over-year.

Concerns arise about potential cost increases in Canada due to attacks on commercial vessels in the Red Sea, a major global trade route. Yemen's Houthi rebels have targeted ships in this area, prompting some major companies to cease trafficking. Although Canada has limited presence in the region, disruptions in international supply chains could impact the country.

Bank of Canada Governor Tiff Macklem suggested the possibility of interest rate cuts in the coming year, contingent on core inflation decreasing as anticipated. Mortgage interest costs increased by almost 30%, contributing to the annual inflation rate of 3.1%. Macklem highlighted persistent increases in shelter prices as a major factor in inflation.

Deliberations from the Bank of Canada's latest rate decision indicate that the current benchmark interest rate might be sufficient to bring inflation back to the two percent target. However, policymakers expressed concerns about a potential resurgence in the Canadian housing market if interest rates are cut too quickly.

Despite the optimism, the governing council acknowledged ongoing risks in the inflation outlook, particularly in the housing market. Some members noted a "structural shortage of supply" keeping housing prices elevated, and monetary policy alone could not address this issue.

The US dollar faced challenges, hovering near a four-month low ahead of a key US inflation gauge reading. The US GDP increased at a 4.9% annualized rate in the last quarter, revised down from the previously reported 5.2%. The number of Americans filing new claims for unemployment benefits rose marginally, indicating underlying strength in the economy.

Investors are awaiting the US core personal consumption expenditure (PCE) index for further insights into inflation trends. Expectations are for the core PCE price index to rise 3.3% on an annual basis, slightly lower than October's 3.5%. Some investors anticipate the Fed may ease policy to prevent real rates from rising. Consequently, the USD/CAD currency pair is expected to fluctuate within the lower range in the upcoming period, and there is a possibility of a correction with restricted strengthening of the Canadian dollar in the following year.

Data for Technical Analysis (5H) CFD USD/CAD

Resistance : 1.3312, 1.3323, 1.3341

Support : 1.3276, 1.3265, 1.3247

5H Outlook     

Source: Investing.com

Buy/Long 1 If the support at the price range 1.3266 - 1.3276 is touched, but the support at 1.3276 cannot be broken, the TP may be set around 1.3312 and the SL around 1.3261, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.3312 - 1.3322, TP may be set around 1.3348 and SL around 1.3271, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.3312 - 1.3322 is touched, but the resistance 1.3312 cannot be broken, the TP may be set around 1.3265 and the SL around 1.3327, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.3266 - 1.3276, TP may be set around 1.3240 and SL around 1.3317, or up to the risk appetite.       

Pivot Points Dec 22, 2023 02:24AM GMT

Sources: Investing, GLOBAL NEWS, The Star