USD/CAD: Jobs Report and Powell Speech in Focus

Explore the USD/CAD trajectory, emphasizing the upcoming Jobs Report and Powell speech for insightful market predictions.

USD/CAD ANALYSIS & HIGHLIGHTS

• CAD remains strong due to OPEC+ production cuts.
• Today’s focus is the Canadian jobs report, ISM manufacturing PMI, and Fed comments.
• Falling wedge support is under threat.

CANADIAN DOLLAR FUNDAMENTAL OUTLOOK

The Canadian dollar is rising against the USD, hitting levels not seen since late September. The loonie is gaining momentum despite GDP figures falling short of estimates and a drop in average weekly earnings. OPEC+ announcing deeper voluntary cuts until the end of Q1 2024 is mainly attributed to this gain. While crude oil markets do not express overwhelming enthusiasm, analysts anticipate that the decision will reduce the 2024 surplus, potentially boosting Canadian crude oil prices and supporting the local currency.

Money markets are increasingly betting on interest rate cuts by the Bank of Canada (BoC), with cumulative rate cuts by December 2024 hovering around the 100bps mark. Today, the focus is on Canada’s jobs report, and if the data aligns with expectations, the recent dovish sentiment may persist, considering the ongoing tight labor market conditions.

USD/CAD: Jobs Report and Powell Speech in Focus

From a US perspective

After experiencing a sharp drop in October, the ISM manufacturing PMI release becomes crucial, with expectations that it will remain below 50 in contractionary territory. The highlight of the day will be Fed Chair Jerome Powell’s speech, with markets closely monitoring any change in tone. Powell previously stated that the Fed is not considering rate cuts soon, making it attractive to see if he maintains this stance.

TECHNICAL ANALYSIS

USD/CAD price action shows the pair testing falling wedge support, with the 200-day moving average not far away. Anticipate a USD pullback, but a confirmed break below 1.3500 could alter this outlook.

Key resistance levels

• 1.3700/Wedge resistance
• 50-day MA
• 1.3600
• 1.3575

Key support levels

• Wedge support
• 200-day MA
• 1.3500

IG CLIENT SENTIMENT DATA: BEARISH

IGCS reveals retail traders are currently net LONG on USD/CAD, with 51% holding short positions (as of this writing).

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