- Most market participants are waiting for the outcome of the US presidential elections.
- Canada’s manufacturing sector expanded further in October.
- The data revealed that the US economy added just 12,000 jobs in October.
The USD/CAD outlook shows caution ahead of the highly anticipated US presidential election. The Canadian dollar remained steady as investors reviewed Friday’s strong manufacturing activity report. On the other hand, the dollar weakened after Friday’s employment data solidified bets for a November Fed rate cut.
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There are only two possible outcomes for the US election: a Democratic victory for Kamala or a Republican victory for Trump. Analysts predict a continuation of the current policy with Kamal. Therefore, the outlook for the economy is likely to remain unchanged, allowing the Fed to end its term by cutting interest rates. This would cause the dollar and USD/CAD to fall.
On the other hand, Trump has proposed some tariff changes that would hurt the Canadian dollar. Canada exports most of its products to the US, so tariffs on imported goods would hurt the Canadian economy and the lunatics. At the same time, experts believe Trump’s policies will boost inflation, complicating the prospect of a Fed rate cut. In this case, the dollar would strengthen.
Meanwhile, data on Friday revealed that Canada’s manufacturing sector expanded further, with the PMI reaching 51.1 in October. A recovery in the economy could ease pressure on the Bank of Canada to reduce borrowing costs.
In the US, data revealed that the economy added just 12,000 jobs in October. It was a significant drop from the previous reading of 254,000. Therefore, it increased the likelihood of a rate cut in November.
USD/CAD Key Events Today
The pair will start the week quietly with no key events coming out of Canada or the US.
USD/CAD Technical Outlook: Bears are strengthening within a bullish wedge
On the technical side, the USD/CAD price is trading in a bullish wedge pattern. However, the price broke below the 30-SMA, indicating a change in sentiment. At the same time, the RSI broke below 50, indicating stronger bearish momentum.
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Bullish momentum peaked at the start of the wedge pattern. Since then, the bulls have gradually lost enthusiasm, leading to a divergence between the RSIs. A break below the wedge support would allow the price to return to the 1.3825 support level and likely start a downtrend.
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