Dollar Continues to Strengthen: ADP and Bank of Canada Decision in Focus

The US dollar continues to strengthen following its previous period of weakness, gradually recovering ground against the major currencies. Today, market attention will be focused on the preliminary ADP employment figures for the US. According to forecasts, the private sector is expected to have added 48K jobs, following an increase of 44K the previous month. A significant deviation from expectations could increase dollar volatility and prompt a reassessment of expectations for the Federal Reserve's future policy.

The situation in the Middle East remains another important factor. Tensions surrounding Iran continue to support demand for safe-haven assets and increase volatility in the oil market. Stronger demand for safe havens could also support the yen and partially limit the upside potential of USD/JPY.

For USD/CAD, the Bank of Canada's meeting will be the key event. The central bank is expected to keep its policy rate unchanged at 2.25%, meaning that attention will focus primarily on the accompanying statement and press conference. A more dovish tone could increase pressure on the Canadian dollar and support further gains in the pair.

Oil will remain another important driver. EIA crude inventory data and geopolitical tensions surrounding Iran could have a significant impact on oil prices and, consequently, on the Canadian dollar.

USD/JPY

Following last week's recovery, USD/JPY has once again tested the important 159.40–159.80 support area. Yesterday, buyers managed to establish the pair above the psychological 160.00 level.

If the US employment data comes in stronger than expected, the advance could continue towards 160.50–161.00. The bullish scenario would be invalidated by a firm move below 159.40.

Key events for USD/JPY:

• today at 14:00 (GMT+3): US MBA Mortgage Applications;
• today at 15:15 (GMT+3): US ADP Nonfarm Employment Change;
• tomorrow at 03:30 (GMT+3): Japan Services PMI.

USD/CAD

USD/CAD has been consolidating within a narrow 1.3840–1.3910 range over recent trading sessions.

A breakout and sustained move above 1.3910 could pave the way for further gains towards 1.3960–1.4000. Conversely, a break below the lower boundary of the range could lead to another test of the recent lows around 1.3730–1.3780.

Key events for USD/CAD:

• today at 16:45 (GMT+3): Bank of Canada interest-rate decision;
• today at 17:30 (GMT+3): US crude oil inventories;
• today at 17:30 (GMT+3): Bank of Canada press conference.

The dollar is maintaining its upward momentum, although today's events could significantly influence the next direction of the market.

For USD/JPY, the main drivers will be the ADP employment figures and any subsequent repricing of expectations for Federal Reserve policy. USD/CAD will additionally be influenced by the Bank of Canada's decision and developments in the oil market.

Stronger-than-expected US data combined with a dovish BoC tone could support further gains in both pairs, while weaker US figures or more hawkish signals from the Canadian central bank could limit the dollar's recovery.

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips (additional fees may apply). Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.