- Statistics Canada found that employment grew almost twice as much as analysts had expected.
- Investors backed off bets on an early rate cut by the Bank of Canada.
- US data revealed a downward revision of inflation in December.
The USD/CAD outlook was bearish on Monday as investors continued to absorb a positive Canadian jobs report. On Friday, Statistics Canada revealed that employment grew almost twice as much as analysts had expected.
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Meanwhile, wage growth and unemployment experienced a slight decline. Still, the overall picture was of a resilient labor market. As a result, investors pulled back bets on an early rate cut by the Bank of Canada. At this point, markets are expecting the first rate cut in June.
This has also been the case in the US, where policymakers are patiently waiting to see inflation hit the 2% target. Notably, the dollar weakened on Friday after data revealed a downward revision to December inflation.
However, the outlook for a Fed rate cut remained the same, with almost no prospect of it starting in March. At the same time, bets for March have gradually declined and now show a 60% chance of a rate cut.
Elsewhere, oil prices paused their recent rally after rising about 6% last week. Monday’s pause came after Israel said it did so with strikes on southern Gaza. As a result, this eased concerns about supply disruptions in the Middle East. In particular, reduced tensions in that area could lead to further oil declines, which would hurt the Canadian dollar.
USD/CAD Key Events Today
Investors today do not expect major releases from the US or Canada. Therefore, it could be a slow day for the couple.
USD/CAD Technical Forecast: Bear’s eye breaks below 0.5 fib support
On the technical side, the USD/CAD pair paused near the 0.5 Fib retracement level. Furthermore, the price is trading with the nearest support at 1.3375 and the nearest resistance at 1.3525. Meanwhile, indicators on the chart show that the bears have the upper hand as the price is trading below the 30-SMA with the RSI just below 50.
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Therefore, there is a good chance that the bears will soon break below the 0.5 fib support. After that, the price is likely to fall to the support level of 1.3375. However, the price must break below 1.3375 and start making lower lows for the price to move lower.
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