- The USD/CAD price analysis shows a steep rally in the Canadian dollar.
- Next week’s nonfarm payrolls report will keep shaping the outlook for Fed rate cuts.
- Data on Friday revealed that Canada’s economy contracted by 0.1%.
The USD/CAD price analysis shows a steady Canadian dollar as the greenback heads for a monthly loss due to Fed rate cut expectations. At the same time, market participants are still grappling with the recent threats to the Federal Reserve’s independence.
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Market participants are still expecting a rate cut next month as policymakers assume a more dovish tone. On Thursday, Fed’s Christopher Waller said that he expects to lower borrowing costs next month. Additionally, he said there will be more to come.
Rate cut bets have surged this month, mainly due to downbeat US employment data. Next week’s nonfarm payrolls report will keep shaping the outlook for rate cuts. At the same time, the dollar has weakened due to the conflict between Trump and the Fed. However, the future of Trump’s attempt to fire Governor Lisa Cook remains uncertain.
“While markets remain reluctant to speculate on this Fed story and continue to focus on data-driven short-term developments, the downside risks for the dollar have undoubtedly grown,” Francesco Pesole, an FX strategist at ING, said in a note.
Meanwhile, data on Friday revealed that Canada’s economy contracted by 0.1%. Meanwhile, core inflation in the US met expectations at 0.3%.
USD/CAD key events today
Traders do not expect more reports from the US or Canada.
USD/CAD technical price analysis: Bears pause at the 1.3750 support after channel breakout
On the technical side, the USD/CAD price has broken out of its bullish channel and dropped to retest the 1.3750 support level. Moreover, the price trades below the 30-SMA, with the RSI near the oversold region, suggesting a bearish bias.
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Bulls failed to maintain the previous trend after breaking above the 1.3875 resistance level. Instead, bears emerged with solid momentum and made a strong candle that broke below the 30-SMA. Soon after, the price broke below its channel support and dropped to the 1.3750 support level.
However, after such a steep drop, the decline might pause, allowing the price to pull back and retest the 30-SMA resistance. Nevertheless, the downtrend will continue as long as the price remains below the SMA.
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