- Recent data revealed that inflation surged unexpectedly in September.
- US unemployment claims rose to 258,000, exceeding the anticipated 230,000.
- Canada’s labor market may see an addition of 29,800 jobs, up from the prior count of 22,100.
The outlook for USD/CAD indicates a significant rally as the dollar strengthens amid positive economic indicators. Simultaneously, expectations for a Fed rate cut are gradually decreasing, suggesting the possibility of a pause in November. The Canadian dollar, however, remains weak ahead of crucial domestic employment data.
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The US dollar has gained significant appeal recently, driven by better-than-expected economic results. A robust economy has prompted investors to reduce their expectations for a rate cut at the upcoming Federal Reserve meeting in November.
For example, data released on Thursday highlighted that inflation increased more than anticipated in September. The monthly rate rose by 0.2%, surpassing expectations of 0.1%. In addition, the annual inflation rate climbed to 2.4%, while economists had predicted a 2.3% increase.
Conversely, another report indicated softer labor market conditions, with unemployment claims rising to 258,000, contrary to forecasts of 230,000. By the day’s end, market participants reflected a 20% chance of a Fed pause in November.
The US economy demonstrates resilience at a time when many had anticipated a downturn. Should this momentum persist, the Fed could achieve a soft landing, provided that inflation continues its downward trend toward the 2% target.
Meanwhile, the Canadian dollar depreciated against the US dollar, even with recent increases in oil prices. Markets are keenly awaiting Canada’s monthly employment statistics. Forecasts suggest an addition of 29,800 jobs, up from the previous figure of 22,100, although the unemployment rate may rise from 6.6% to 6.7%.
Key Events for USD/CAD Today
- US Core PPI m/m
- US PPI m/m
Technical Outlook for USD/CAD: Strong Rally Targeting 1.3800 Resistance
From a technical perspective, the USD/CAD price has surged to unprecedented highs, surpassing significant resistance levels. This upward movement places the price well above the 30-day simple moving average, which supports a robust bullish trend. The RSI is currently in the overbought region, indicating strong bullish momentum. Additionally, the price has increased without notable pullbacks to retest the 30-SMA, signaling that the uptrend is quite aggressive.
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With a strong bullish tendency, the price could soon approach the 1.3800 resistance level. However, due to its overbought condition, a brief pause and pullback may occur before the uptrend resumes.
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