- US services PMI data came in at 54.9, well above the forecast of 51.7.
- Market participants estimate a 65% chance of a rate cut of 25 basis points in November.
- Canada’s services PMI fell from 47.8 to 46.4 in August.
USD/CAD price analysis shows bulls moving ahead as dollar companies follow upbeat US business activity data and ahead of non-farm payrolls. At the same time, a change in Fed policy and tensions in the Middle East supported the dollar. Meanwhile, the lunatic was weak after poor data on business activities.
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On Thursday, the dollar got a boost from services PMI data, which came in at 54.9, well above the forecast of 51.7. Strong business activity in the service sector indicates a strong economy. Accordingly, the Fed may prefer a gradual pace of rate cuts. As a result, market participants estimate a 65% chance of a rate cut of 25 basis points in November.
Moreover, Powell recently confirmed that the Fed will move at a slower pace with two small tapering before the end of the year. However, as more data comes in, this perspective could change.
The next report will show US job growth and unemployment in September. Analysts believe that the economy will add 148,000 workers, while the unemployment rate remains at 4.2%. The unexpected outcome could cause volatility, affecting expectations of a Fed rate cut.
Elsewhere, Middle East tensions kept demand high for the dollar. Meanwhile, while oil also rose, the Canadian dollar fell on poor economic data. Canada’s services PMI fell from 47.8 to 46.4 in August. A bad economy means more rate cuts that will hurt the crazies.
USD/CAD Key Events Today
- Average hourly earnings in the US m/m
- Change in non-farm employment in the US
- Unemployment rate in the US
USD/CAD technical price analysis: The target is 1.3580
On the technical side, the USD/CAD price is rising after a rejection from the key support level of 1.3475. Price is climbing above the 30-SMA, supporting the bullish bias. At the same time, the RSI is trading on the upper side of bullish territory. Therefore, it could soon reach the overbought region, which happens when the price is in a solid uptrend.
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If this move continues, it could be stopped at the key resistance level of 1.3580. There could be a pullback to retest the 30-SMA here before the uptrend resumes. A break above 1.3580 would strengthen the bullish bias.
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