- Data revealed that Canada’s economy added only 14,500 jobs.
- Market participants are pricing a 60% chance of a 50-bps BoC rate cut in December.
- Traders eagerly await US inflation data this week.
The USD/CAD outlook suggests an extension of the move on Friday as the Canadian dollar remains weak after downbeat data. Meanwhile, the greenback was on the front foot at the start of a week packed with crucial US economic reports.
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The Canadian dollar plunged on Friday after domestic data revealed that the economy added only 14,500 jobs. Meanwhile, economists had expected a more significant increase of 27,900. Moreover, the actual figures came in well below the previous month’s increase of 46,700.
On the other hand, the unemployment rate held steady at 6.5%. This report increased the likelihood of another super-sized Bank of Canada rate cut this year. Currently, market participants are pricing a 60% chance of a 50-bps rate cut in December.
While the Bank of Canada becomes more aggressive with rate cuts, the Fed might adopt a more gradual pace. Consequently, a growing policy divergence between Canada and the US is weighing on the loonie.
The greenback rallied last week after Donald Trump won the US election, shifting the outlook for fiscal and monetary policies. Under Trump’s administration, government spending will likely increase. At the same time, tax cuts and import tariffs will probably lead to a spike in inflation. Consequently, most analysts have adjusted the outlook for Fed rate cuts next year to fewer cuts. Nevertheless, markets expect another 25-bps rate cut in December.
Elsewhere, traders eagerly await US inflation data this week that might increase or lower the likelihood of a December rate cut.
USD/CAD key events today
There won’t be any significant economic reports from Canada or the US today, meaning a slow start to the week.
USD/CAD technical outlook: Bullish trend perplexed under 1.3951
On the technical side, the USD/CAD price is climbing towards the 1.3951 resistance level. It trades above the 30-SMA, with the RSI above 50, suggesting a bullish bias. However, there is no clear bias on a larger scale since the price is chopping through the 30-SMA. At the same time, it is trading within a range with support at 1.3825 and resistance at 1.3951.
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Nevertheless, there is a high chance this is a pause in the previous bullish trend. Therefore, a break above 1.3951 will signal a continuation of the uptrend.
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