- The U.S. posted a lower-than-expected 7.67 million job vacancies in July.
- Investors have increased the probability of a 50 basis point Fed rate cut to 45%.
- The Bank of Canada cut rates by 25 basis points on Wednesday, as expected.
The USD/CAD forecast points to renewed dollar weakness after poor data increased the likelihood of a super-major Fed rate cut in September. At the same time, the Canadian dollar was strengthened by oil after reports of a possible delay in the OPEC+ production increase in October.
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Data on Wednesday showed the US posted 7.67 million job vacancies in July. The number hit a three-and-a-half-year low and missed estimates of 8.09 million. In particular, the Fed pays a lot of attention to the labor market. Initially, this sector was the main driver of inflation. However, that has changed, and the labor market is showing weakness. Consequently, investors increased the probability of a 50 basis point rate cut to 45%. As a result, the dollar slipped, pushing the USD/CAD pair lower.
All eyes are now on the all-important non-farm payrolls report. Economists expect some improvements compared to last month’s poor report. Therefore, any miss is likely to cause a lot of turmoil in the market. The unemployment rate shows the risk of recession. Thus, another unexpected jump could raise concerns about a recession, which would further hurt the dollar. At the same time, it will solidify bets for a more significant rate cut.
Meanwhile, as expected, the Bank of Canada cut rates by 25 basis points on Wednesday. The Canadian dollar rose as investors had already weighed in on such a move. Moreover, the currency gained support following reports that OPEC+ is discussing delaying a planned production increase in October. This news raised oil prices due to the prolonged closure of the market.
USD/CAD Key Events Today
- US ADP change in non-farm employment
- US unemployment claims
- US ISM services PMI
USD/CAD Technical Forecast: Price action indicates bearish strength
From the technical side, USD/CAD the price is on the verge of breaking below the 30-SMA, indicating an imminent change in sentiment. Before that, the bulls were in the lead and moving towards the resistance level of 1.3600. However, the price action suddenly changed, and the bears made a large candle, indicating an increase in momentum. At the same time, the RSI fell into bearish territory below 50.
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If the price breaks below the SMA, it is likely to retest 1.3450. A break below this level would indicate a continuation of the previous downtrend.
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