- Weakness in the US labor market will increase the urgency of the Fed’s rate cuts.
- Investors will now await next week’s US CPI report.
- The Canadian dollar strengthened as oil prices recovered.
The outlook for USD/CAD is bearish as the dollar moderates expectations of a Fed rate cut. Meanwhile, the Canadian dollar extended its recovery this week amid rising oil prices.
-Are you looking for automated trading? Check out our detailed guide-
The dollar weakened slightly on Thursday as investors priced in the Fed’s first rate cut in September. Earlier this week, the focus was on the risk of a US recession. However, calm has returned and traders are now looking at the likelihood of a 50 basis point rate cut in September.
The move to a more substantial cut followed last week’s report on bad jobs. Weakness in the labor market will increase the urgency of a rate cut, weighing on the US dollar. At the same time, policymakers have taken a more dovish view, indicating a belief that demand is falling.
Investors will now await the US CPI report, which will continue to shape the outlook for Fed policy. More easing of price pressures will bolster bets for a September rate cut. On the other hand, any jumps could reduce rate cut expectations and support the dollar.
On the other hand, the Canadian dollar strengthened as oil prices recovered. Oil rose after a bigger-than-expected drop in US crude inventories. At the same time, supply concerns remain due to rising tensions in the Middle East.
The loonie is edging further away from Monday’s two-year low. However, despite the recent recovery, the Bank of Canada remains concerned about the economy. As a result, markets expect more interest rate cuts in Canada, putting pressure on the Canadian dollar.
USD/CAD Key Events Today
USD/CAD Technical Outlook: Bears are approaching support at 1.3701
From the technical side, USD/CAD the price is approaching the key support level of 1.3701. Bearish bias is strong, with price trading well below the 30-SMA and RSI in bearish territory. However, the price could pause after the recent sharp swing to allow the 30-SMA to catch up. Moreover, it may pull back to retest the SMA before it goes lower.
-If you are interested in Forex day trading, please read our getting started guide-
If the bears break below the 1.3701 level, they will target the next support at 1.3601 and the downtrend will continue as long as the price trades below the SMA.
Do you want to trade Forex now? Invest in eToro!
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money.
