- The data revealed that the Canadian economy added just 14,500 jobs.
- Market participants estimate a 60% chance of a 50 bps BoC rate cut in December.
- Traders are eagerly awaiting US inflation data this week.
The outlook for USD/CAD suggests an extension of Friday’s move as the Canadian dollar remains weak following poor data. Meanwhile, the dollar was on top at the start of a week packed with key US economic reports.
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The Canadian dollar fell on Friday after domestic data revealed that the economy added only 14,500 jobs. Meanwhile, economists had expected a more significant increase of 27,900. Moreover, the actual numbers were well below the previous month’s increase of 46,700.
On the other hand, the unemployment rate is stable at 6.5%. The report raised the likelihood of another rate cut by the Bank of Canada this year. Currently, market participants estimate a 60% chance of a rate cut of 50 basis points in December.
As the Bank of Canada becomes more aggressive with interest rate cuts, the Fed may adopt a more gradual pace. Consequently, the growing difference in policy between Canada and the US is weighing on the lunatics.
The dollar strengthened last week after Donald Trump won the US election, changing the outlook for fiscal and monetary policy. Under the Trump administration, government spending is likely to increase. At the same time, tax cuts and import tariffs are likely to lead to a surge in inflation. Accordingly, most analysts have adjusted their outlook for Fed rate cuts next year to smaller cuts. Still, markets expect another rate cut of 25 basis points in December.
Elsewhere, traders are eagerly awaiting US inflation data this week that could increase or decrease the likelihood of a rate cut in December.
USD/CAD Key Events Today
There will be no significant economic reports from Canada or the US today, meaning a slow start to the week.
USD/CAD Technical Outlook: Bullish trend confused below 1.3951
From the technical side, USD/CAD the price is climbing towards the resistance level of 1.3951. It is trading above the 30-SMA, with the RSI above 50, indicating a bullish bias. However, there is no clear bias on the larger scale as the price cuts through the 30-SMA. At the same time, it is trading in a range with support at 1.3825 and resistance at 1.3951.
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However, there is a good chance that this is a break in the previous bullish trend. Therefore, a break above 1.3951 will signal a continuation of the uptrend.
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