- The Canadian dollar fell to a two-week low on Friday.
- Canada’s unemployment rate jumped from 6.4% to 6.5%, increasing the chances of the Bank of Canada making further rate cuts.
- The US economy added 142,000 jobs, below expectations for 160,000.
The USD/CAD outlook shows a change in bullish sentiment as investors weigh the US and Canadian labor sectors. Reports on Friday showed that the US labor market is not doing as badly as initially feared. On the other hand, Canada’s unemployment rate jumped, which raised the Bank of Canada rate and lowered expectations.
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The Canadian dollar fell to a two-week low on Friday as domestic data pointed to a more significant rate cut in Canada. The Canadian economy added 22,100 jobs, missing forecasts of 23,700. At the same time, the unemployment rate jumped from 6.4% to 6.5%. The labor market is declining rapidly, which could prompt the Bank of Canada to consider a more significant rate cut. Following the report, markets priced in 63 basis points for a rate cut to come.
Meanwhile, the US labor market was in somewhat better shape. The economy created 142,000 jobs, below expectations of 160,000. Meanwhile, the unemployment rate dropped to 4.2%, reducing fears of a recession. The latest report spooked investors, with the unemployment rate jumping to 4.3%. As a result, markets increased bets on a 50 bps rate cut. However, with the latest data, the Fed may prefer a 25 bps rate cut.
Investors will focus on US consumer inflation data on Wednesday this week. Economists expect the headline figure to cool further from 2.9% to 2.6%, bringing price pressure closer to the Fed’s target.
USD/CAD Key Events Today
The pair could start the week slowly, as neither the US nor Canada will release any major reports today.
USD/CAD Technical Outlook: Price action supports more upside
On the technical side, the USD/CAD price is approaching the key resistance level of 1.3600. The price is above the 30-SMA and the RSI is near the overbought region, indicating a bullish bias. The trend recently reversed, with the bears losing control at the 1.3450 support level.
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However, the price currently fell below the SMA after the bulls took control. The price action here has shown that the bullish momentum is stronger. Cena made a doji candlestick pattern before making a large bullish candlestick. Accordingly, USD/CAD could soon break above 1.3600.
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