- The number of jobs in Canada rose more than expected in February.
- The US unemployment rate rose to 3.9% compared to expectations of 3.7%.
- Oil fell on Friday and ended last week lower as investors worried about demand in China.
The USD/CAD outlook reveals a slight bearish tone as markets contrast an upbeat Canadian jobs report with mixed signals from the US labor market. However, amid this comparison, the pair is finding support in softer oil prices, which is contributing to the Canadian dollar’s weakness.
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Both the US and Canada released employment reports on Friday. In Canada, the number of jobs rose more than expected in February, showing a strong labor market. As a result, the Bank of Canada has more reason to delay a rate cut. Meanwhile, the US posted a mixed report, showing weakness in the labor market. Employment rose, but the unemployment rate rose to 3.9% against expectations of 3.7%. Therefore, there is more evidence that demand in the economy is weakening, paving the way for rate cuts starting in June.
Markets expect the first BoC cut in June, as does the Fed. However, unlike the Fed, which is gaining confidence that inflation is falling, the BoC needs more convincing. Accordingly, the Canadian dollar strengthened against the US dollar. This sets the stage for a downtrend in the pair.
However, the recent drop in oil prices has limited the Canadian currency’s gains. Oil fell on Friday and ended last week lower as investors worried about demand in China. China is the second largest consumer of oil. Therefore, weak domestic demand is hurting oil prices.
USD/CAD Key Events Today
There will be no major reports from the US or Canada today. Accordingly, investors will continue to digest Friday’s employment report.
USD/CAD Technical Outlook: Price retests channel support after breakout
On the charts, USD/CAD pulled back to retest its recently broken channel support. The move came after the price made fresh lows below the key support level of 1.3450. To fully confirm a channel breakout, price must make a lower low after retesting channel support as resistance.
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Therefore, if the support line of the channel remains firm, the price will jump lower by the lower low. Moreover, the bears will get an opportunity to target the support level of 1.3375. However, if the price moves back into the bullish channel and above the 30-SMA, it will confirm a false breakout. Consequently, the price would rise to retest the resistance level at 1.3600.
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