- Canada’s unemployment rate has risen to 6.4% in more than two years.
- The odds of a BoC cut in July rose from 40% to 56%.
- Investors await Powell’s speech to see where policymakers stand on rate cuts.
The USD/CAD outlook is slightly bullish as the Canadian dollar remains weak after last week’s dismal jobs report. Meanwhile, investors are preparing for Powell’s testimony, which could contain clues about the Fed’s outlook.
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The Canadian dollar fell sharply on Friday after Canada’s unemployment rate rose to 6.4% in more than two years. This was a sign that more and more people were losing their jobs. At the same time, the economy lost 1,400 jobs in June. Meanwhile, analysts had expected an increase of 22,500 jobs.
Economists worry the bad jobs report could point to a recession, forcing the Bank of Canada to cut interest rates. After the report, the odds of a BoC cut in July rose from 40% to 56%.
On the other hand, the dollar was also fragile after Friday’s employment data. Although not as bad as in Canada, the US labor market has also softened. The unemployment rate rose from 4.0% to 4.1%, raising the probability of a Fed tapering in September to 76%.
Investors await Powell’s speech to see where policymakers stand on rate cuts. Dovish talk could increase bets for a September cut. However, the Fed chairman may stress the need for more evidence, especially with the upcoming inflation report. If price pressures ease, policymakers will be more confident that inflation will meet the central bank’s target. Because of this, they could take on a more dovish tone.
USD/CAD Key Events Today
- Fed Chairman Powell testifies
USD/CAD Technical Outlook: Bulls face a solid resistance barrier
On the technical side, the USD/CAD price rose to the 30-SMA resistance after revisiting the support of its bearish channel. Moreover, the bias remains bearish, with price below the SMA and RSI just below 50. Bulls are currently challenging the 30-SMA resistance.
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If the price breaks above the SMA, it will reach the key resistance level of 1.3650. A break above this would allow USD/CAD to revisit its channel resistance line. However, if the bulls are not strong enough to push the price above the current resistance zone, it is likely to return to the channel support and the key level of 1.3600.
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