- The USD/CAD forecast points south as the loonie strengthens ahead of a likely BoC pause.
- Market participants are waiting to see developments in trade negotiations.
- The US is set to release the nonfarm payrolls report on Friday.
The USD/CAD forecast points south as the loonie strengthens ahead of a likely BoC pause. At the same time, the US dollar was fragile as traders watched developments in trade negotiations. Moreover, market participants were cautious ahead of the crucial nonfarm payrolls report.
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After stronger than expected economic data from Canada, traders expect the Bank of Canada to pause again on Wednesday. The central bank paused its easing cycle durig the last meeting, allowing the loonie to gain. Initially, it had been one of the most aggressive in lowering borrowing costs. However, this has changed.
Traders will also pay attention to the messaging on future moves. A dovish message could hurt the Canadian dollar. On the other hand, a cautious tone could further support Canada’s currency.
Meanwhile, the dollar was weak as traders preferred to stay on the sidelines. Market participants are waiting to see developments in trade negotiations between the US and its partners. Trump called on these countries to provide offers for negotiations by Wednesday. At the same time, the US is set to release the nonfarm payrolls report on Friday. This will shape the outlook for Fed rate cuts.
USD/CAD key events today
- US ADP nonfarm employment change
- BoC rate statement
- US ISM services PMI
- BoC press conference
USD/CAD technical forecast: Bears cracking 1.3701 support
On the technical side, the USD/CAD price is retesting the 1.3701 support level. It trades far below the 30-SMA, with the RSI in bearish territory below 50. Therefore, the bearish bias is strong.
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The price recently resumed its decline after bears took charge near the 1.3850 resistance level. However, their first attempt at the 1.3701 support failed and the price bounced higher. At the moment, the price is making another attempt at this level. A break below will allow bears to reach the 1.3650 support.
However, if the level holds firm again, the price will likely bounce higher to retest the 30-SMA. The bearish bias will remain if the price stays below the SMA. On the other hand, a break above the SMA line would allow USD/CAD to climb to the 1.3850 level.
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