USD/CAD Price Analysis – Oct 08, 2024
Daily Price Outlook
During Tuesday's European session, the USD/CAD pair maintained its upward trend, trading bullish around the 1.3638 level and reaching an intra-day high of 1.364. This strength comes as the Canadian Dollar weakens amid uncertainty ahead of the September employment data. Although a stronger job addition of 28K may initially support the CAD, the anticipated rise in the unemployment rate to 6.7% could stoke speculation about further interest rate cuts by the Bank of Canada, thereby weakening the CAD against other currencies.
Meanwhile, the US dollar is struggling to extend its gains as investors focus on the upcoming US Consumer Price Index (CPI) data for September, set to be released on Thursday. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, remains steady near 102.50.
Impact of US Inflation Data and Fed Rate Decisions on the USD/CAD Pair
On the US front, the US dollar is having trouble gaining traction as investors focus on the upcoming Consumer Price Index (CPI) data for September, set to be released on Thursday. The US Dollar Index (DXY), which measures the Greenback's strength against six major currencies, hovers around 102.50. This inflation data is crucial as it will influence expectations for the Federal Reserve's (Fed) interest rate decisions. Currently, market participants anticipate a smaller rate cut of 25 basis points in November, despite earlier expectations for a more significant reduction.
Recent comments from Fed Governor Adriana Kugler suggest that further rate cuts could be necessary if inflation continues to decline as expected. This shift highlights a strong labor market, which has led investors to reduce their bets on major interest rate cuts. According to the CME's FedWatch tool, there is an 85% chance of a 25 basis point cut at the Fed's November meeting.
Federal Reserve officials are now more concerned about rising unemployment than high inflation, prompting caution among traders as they await key inflation data, including the CPI and Producer Price Index (PPI), along with minutes from the recent Federal Open Market Committee (FOMC) meeting.
Therefore, the uncertainty surrounding US inflation data and potential Fed rate cuts may create volatility in the USD/CAD pair. A weaker USD due to disappointing CPI results could allow the CAD to strengthen, impacting the pair's direction amid fluctuating market sentiment.
Canadian Dollar Strength Amid Anticipation of Employment Data and Potential Rate Cuts
On the CAD front, the Canadian Dollar (CAD) is showing some strength despite recent weaknesses in its performance. Investors are eagerly anticipating the employment data set to be released on Friday. This report is expected to reveal that Canada added 28,000 jobs in September, an increase from the 22,100 jobs added in August. However, analysts predict that the unemployment rate will rise to 6.7% during the same period, which could indicate ongoing challenges in the labor market.
If the job data shows more signs of trouble, it could lead to speculation about further interest rate cuts from the Bank of Canada (BoC). This year, the BoC has already lowered interest rates by 75 basis points to 4.25% in response to returning inflation at the bank's target of 2% and a shaky economic outlook.
If Canada's employment data shows weaker-than-expected job growth or a rising unemployment rate, it could increase speculation about further interest rate cuts by the Bank of Canada. This scenario may lead to a weaker CAD, strengthening the USD/CAD pair.
USD/CAD - Technical Analysis
USD/CAD is trading at 1.36216, maintaining a neutral stance in a narrow range just above its pivot point at 1.36129. The pair is showing resilience as it struggles to break above the immediate resistance level at 1.36390. A sustained move above this level could signal a continuation of the recent bullish trend, with further resistance targets at 1.36612 and 1.36833.
The pair’s Relative Strength Index (RSI) is currently at 61, indicating mild bullish momentum. This suggests that there is still some room for upside movement before USD/CAD enters overbought territory. Supporting this view, the 50-day Exponential Moving Average (EMA) is positioned at 1.35891, providing a key support level that has been consistently holding up in recent sessions.
On the downside, the immediate support at 1.35905 is crucial for maintaining the short-term bullish bias. If prices fall below this support, the pair could see further declines towards 1.35686 and potentially down to 1.35461, where stronger buying interest may emerge.
Given the current technical setup, a break above 1.36390 could pave the way for further gains, targeting the 1.36612 level in the short term. Conversely, a fall below 1.35905 may trigger a bearish reversal. For now, maintaining a cautious long position above 1.36127 with a take-profit target at 1.36523 and a stop-loss at 1.35964 is advised.
Related News
- GOLD Price Analysis – Oct 08, 2024
JOIN LONGHORNFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.