- The USD/CAD outlook shows robust strength in Canada’s labor market.
- Sentiment has remained poor since Trump announced a 35% tariff on Canada.
- Economists believe US inflation accelerated in June due to Trump’s tariffs.
The USD/CAD outlook shows robust strength in Canada’s labor market, supporting the loonie as a result. However, a potential 35% tariff on the country’s exports to the US have put a lid on gains. Meanwhile, market participants are looking forward to the pivotal US consumer inflation report due this week.
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Data on Friday revealed that Canada’s economy added a robust 83,100 jobs. It was well above the forecast of only 900 new jobs. At the same time, the unemployment rate eased to 6.9%, missing estimates of 7.1%. The data revealed a rebound in the labor sectors, a sign that the Bank of Canada had done a good job lowering interest rates. Moreover, it allows the central bank to continue its pause for a bit longer.
However, sentiment has remained poor since Trump announced a 35% tariff on Canada. The likelihood of higher levies would lower demand for the country’s exports and hurt growth. Therefore, it would undo what the Bank of Canada has done, hurting the Canadian dollar.
Meanwhile, market participants are awaiting the US inflation report. Economists believe price pressures accelerated in June due to Trump’s tariffs. This could force the Fed to maintain its cautious tone on rate cuts.
USD/CAD key events today
Traders are not anticipating any key releases from the US or Canada. Therefore, they will watch US tariff developments.
USD/CAD technical outlook: Bears challenge the 30-SMA support
On the technical side, the USD/CAD price is on the verge of breaking below the 30-SMA after pausing near a solid resistance zone. Initially, bulls had taken the lead by pushing the price above the 30-SMA. However, they did not go very far as the price paused under the 0.618 Fib retracement and the 1.3700 key resistance level. A wick above the resistance zone shows a failed attempt to break above.
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Currently, bears are challenging the 30-SMA support. A break below would signal a shift in sentiment. At the same time, it would allow USD/CAD to return to the 1.3550 support level. However, if bulls regain momentum, the price might break above the resistance zone. In such a case, USD/CAD would climb to retest the 1.3800 resistance level.
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