"CAD Strengthens on Stellar Payroll Data and Oil Prices"

Canada's Robust Economic Indicators

In September, Canada's economy witnessed significant job growth, adding 63,800 jobs, which surpassed initial expectations. Moreover, wages also saw an increase of 5.3%, exceeding the projected rate of 5.1%. These robust economic indicators have heightened the likelihood of the Bank of Canada (BOC) raising interest rates at its upcoming meeting on October 25th, with the odds currently standing at 41.6%.

Comparative Job and Wage Growth

Canada notably outperformed the United States in terms of job and wage growth in September. This comparative strength is now prompting foreign exchange (FX) markets to consider the possibility of the BOC raising interest rates ahead of the Federal Reserve (Fed) in the United States.

Oil Price Bottom and Its Impact on CAD

The Canadian dollar (CAD) is also benefiting from the stabilization of crude oil prices, which have seen improvement following the resilient performance of the US economy. However, it's worth noting that a surge in the US dollar after the release of the Non-Farm Payrolls (NFP) report could potentially push West Texas Intermediate (WTI) crude oil prices towards the $80 mark.

Positive Factors for CAD

Another positive development for the CAD is Russia's decision to lift its ban on diesel exports for supplies delivered to ports via pipelines. This decision was influenced by storage facilities reaching their capacity and lower prices in the domestic market.

Furthermore, in the energy sector, Exxon's acquisition of Pioneer is considered a noteworthy merger and acquisition (M&A) deal, which underscores the potential for further consolidation in the sector due to tightening financial conditions.

USD/CAD Technical Analysis

On the technical front, USD/CAD is forming a bullish trend channel on the daily time frame, although it is also showing bearish divergence. Currently, it has established both a higher high and a higher low, and it appears poised to set another higher low. This suggests the potential for shorting USD/CAD from its present position.

However, it's crucial to monitor whether USD/CAD breaks its prior higher low due to bearish divergence, as this could signify the beginning of a downward trend.

Key Levels:

Support: 50-day Simple Moving Average (SMA) at 1.3523

Resistance: 1.3800