- Oil prices fell on Tuesday as concerns about Chinese demand intensified.
- Market participants awaited the key US non-farm payrolls report.
- Economists expect the US unemployment rate to drop slightly to 4.2% in August.
USD/CAD price analysis is bullish, with the Canadian dollar falling due to falling oil prices. At the same time, investors remained cautious as markets prepared for the US monthly jobs report.
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Oil prices fell on Tuesday as concerns over Chinese demand intensified, overshadowing Libya’s concerns about supply. Falling oil weakens the Canadian dollar, a commodity currency. Canada mainly exports oil, so its currency moves with oil prices.
Meanwhile, the U.S. dollar rallied against weak loonies as market participants awaited a key U.S. nonfarm payrolls report. The dollar rallied strongly last week as data revealed a resilient US economy, reducing the likelihood of an aggressive Fed rate-cutting cycle.
At the same time, fears of a looming recession have diminished as hopes for a soft landing have risen. Data showed on Friday that inflation rose as expected. This eased pressure on the Fed to implement a significant rate cut. Regardless, investors are still fully pricing in a rate cut in September.
The market’s focus has now shifted to this week’s headline US jobs report, which will weigh heavily on rate cut expectations as it did last month. The Fed keeps the unemployment rate high, indicating the likelihood of a recession.
The rate unexpectedly jumped in July, sparking fears of a rapid economic slowdown. Another jump could boost bets for a super-major 50 bps Fed rate cut in September. However, economists expect the unemployment rate to decrease slightly to 4.2% in August.
USD/CAD Key Events Today
USD/CAD Technical Price Analysis: Bulls have set a target at 1.3600
On the technical side, the USD/CAD price has moved from below the 30-SMA to above it, indicating a change in sentiment. The bulls took over after the price failed to break below the 1.3450 support level.
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Bearish momentum has reached maximum levels, with the RSI in the oversold region. After that, the bulls took over, pushing the price above the SMA. However, the price must now make higher highs and lows to confirm a new bullish trend. In this case, the price would bounce back and probably break above the key resistance level of 1.3600.
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