- The dollar fell on Friday after a bad jobs report.
- Investors are betting on two rate cuts in 2024, totaling 45 basis points.
- A Reuters poll cut bets on a stronger Canadian dollar this year.
The USD/CAD outlook is improving slightly as the US Dollar begins to recover from Friday’s employment-driven decline. At the same time, the Canadian dollar weakened after a Reuters poll found the currency to weaken more than expected this year.
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The dollar fell on Friday after a poor jobs report raised expectations for a rate cut by the Fed. The US Labor Department revealed that employment increased by 175,000 fewer than expected in April. Moreover, the unemployment rate exceeded the forecast of 3.8% and rose to 3.9%. The report pointed to a drop in labor market demand that could allow the Fed to cut rates this year. Accordingly, investors bet on two rate cuts in 2024, totaling 45 basis points. However, this is far short of expectations for a BoC rate cut.
Notably, a Reuters poll on Friday reduced bets on a stronger Canadian dollar this year as the Bank of Canada is likely to cut rates well before the Fed. Moreover, the BoC will cut by more than the Fed in 2024. BoC Governor Tiff McClem said last week that they are getting closer to cutting interest rates as policymakers are confident inflation is falling.
Accordingly, there is a 60% chance that the central bank will cut rates in March. Moreover, investors expect a 60 basis point cut this year, more significant than the Fed’s 45 basis points.
USD/CAD Key Events Today
There will be no critical economic reports from Canada or the US today. Therefore, the pair is likely to move sideways.
USD/CAD Technical Outlook: Bullish candle signals possible reversal
On the technical side, the USD/CAD price pulled back sharply after breaking below the support trend line and the critical support level of 1.3650. Although the bias is bearish, the bulls made a candle that could lead to a reversal.
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However, currently the price is below the 30-SMA and the RSI is in bearish territory. For the bulls to take control, the price must break above the SMA. This would pave the way for the bulls to retest the key resistance level of 1.3800. Otherwise, bears will continue the downtrend by breaking below 1.3650 to target support at 1.3551.
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