- Thursday’s data showed that inflation rose more than expected in September.
- US jobless claims rose to 258,000 compared to estimates of 230,000.
- The Canadian economy could add 29,800 jobs, up from the previous 22,100.
The USD/CAD outlook shows a strong rally for the pair as the greenback shines amid upbeat economic data. At the same time, expectations of a Fed rate cut are slowly falling, introducing the likelihood of a pause in November. Meanwhile, CAD remained fragile ahead of key domestic employment data.
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The US dollar has regained its attractiveness in recent weeks due to better-than-expected economic data. A resilient economy prompted investors to reduce bets on a rate cut at the Fed’s November meeting.
For example, Thursday’s data showed inflation rose more than expected in September. The monthly figure rose 0.2%, above estimates of 0.1%. Meanwhile, the annual figure rose 2.4%, while economists had expected a 2.3% increase.
However, a separate report revealed weaker labor market conditions. Notably, jobless claims rose to 258,000 compared to estimates of 230,000. Still, by the end of the day, market participants were pricing in a better than 20% chance of a Fed pause in November.
The US economy has shown resilience at a time when most expected it to deteriorate. If this trend continues, the Fed is likely to achieve a soft landing. However, this can only happen if inflation continues to fall to the 2% target.
Meanwhile, the Canadian dollar fell against the greenback despite recent gains in oil. Markets await monthly Canadian employment data. According to forecasts, the economy could create 29,800 jobs, which is an increase compared to the previous 22,100. Meanwhile, the unemployment rate could rise from 6.6% to 6.7%.
USD/CAD Key Events Today
- US Core PPI m/m
- US PPI m/m
Technical Outlook USD/CAD: Strong growth expecting resistance at 1.3800
On the technical side, the USD/CAD price surged to new highs, breaking through key resistance levels. The rise placed the price well above the 30-SMA, supporting a strong uptrend. At the same time, the RSI is trading in overbought territory, indicating solid bullish momentum. Moreover, the price rose without significant pullbacks to retest the 30-SMA. This is a sign that the uptrend is steep.
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Given the strong bullish bias, the price may soon reach the resistance level of 1.3800. However, since it is overpriced, it could pause and pull back before continuing the uptrend.
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