The dollar has so far failed to take much advantage of the information from the minutes of the Fed's December meeting published yesterday, which confirmed the U.S. central bank's willingness to further tighten monetary policy. The minutes show that Fed officials believe that disruptions in the global supply chain, and elevated inflation risks will persist for at least another year, which means that interest rates will likely be raised again at the next meeting (January 31–February 1). The question for now is how strong the hike will be.

Yesterday, the dollar fell sharply. As the Institute for Supply Management (ISM) reported, the U.S. manufacturing PMI fell to 48.4 in December from 49.0 in November, which also turned out to be slightly worse than expected. The ISM index of new orders in the manufacturing sector also fell in December from 47.2 to 45.2, stronger than expected growth to 48.1.

The JOLTS report released at the same time (15:00 GMT) showed a decline in the number of openings in the U.S. labor market to 10.458 million from 10.512 million in October, putting additional pressure on the dollar.

As of writing, futures for the dollar index (DXY) are trading in a narrow range, near the 104.01 mark and the closing price of yesterday's trading day, while market participants following the dollar quotes are waiting for a new portion of macroeconomic statistics from the United States. Today it will be published at 13:15 and 13:30 GMT, as well as at 14:45, when S&P Global publishes a report on business activity in the U.S. economy.

The focus will be on the ADP report on U.S. private sector employment for December. This report is ahead of the official Labor Department report, which is due on Friday and usually has a strong effect on the market and dollar quotes, although there is no direct correlation with Non-Farm Payrolls.

The state of the labor market (together with GDP and inflation) is a key indicator for the Fed in determining the parameters of its monetary policy.

Strong data will positively affect the dollar; a decrease in the indicator can negatively affect it. In any case, during the publication of this report, there may be an increase in volatility in the market, and above all, in dollar quotes. Previous values: 127,000 in November, 239,000 in October, 192,000 in September, 185,000 in August, 270,000 in July, 358,000 in May, 457,000 in April, 425,000 in March, 375,000 in February, 372,000 in January 2022. Forecast for December: +150,000 new jobs. The indicator is not very strong, but it indicates a resumption of growth after a weaker value a month earlier.

At 13:30, the U.S. Labor Department will release its weekly jobless claims report. The figures are expected to stabilize here, which is likely to have a neutral impact on the dollar (previous weekly data values for initial claims are 225k, 216k, 214k, 231k, 226k, and previous data values for continuing claims are 1710k, 1672k, 1678k, 1670k, 1609k).

Also, tomorrow at 13:30 GMT, Statistics Canada will publish the monthly report on the national labor market with data for December. As with the Fed, GDP, inflation and labor market data are key determinants for the Bank of Canada in planning monetary policy parameters.

Canadian unemployment is expected to rise moderately (+0.1%) to 5.2% in December. That is negative for CAD, which is also under pressure because of declining oil prices, and if the report of U.S. Labor Department is above market expectations and is strong, we should expect a sharp increase in USD/CAD pair.

After yesterday's powerful downward rally, the pair is rising today, moderately strengthening from the opening of the Asian trading session and trading near 1.3500 as of writing. As we mentioned, the labor market data from the USA and Canada, which will be released tomorrow, might become the pair's main driver for the next few days.

From a technical point of view, a breakout of 1.3470, 1.3450 or 1.3530 will be one of the signals for the pair to move in one direction or another.