USD / CAD Weekly Forecast: MILDLY BEARISH
- USD / CAD has been downgraded to over 400 points in the last two weeks
- The weakness in the US labor market and its impact on the Federal Reserve’s monetary policy is further supported USA the weakness of the dollar in the near future. The technical outlook is also somewhat negative
- However, the bear USD/CADthe story may change if the market sentiment deteriorates as economic data deteriorate or if the Bank of Canada takes a strong stance
The The US labor market cooled sharply in August, which has been affected by the weakness of the leisure and hospitality sector during the second major coronavirus outbreak. According to non-agricultural payroll calculations (NFP), the economy created only 235,000 jobs, well below the consensus of 733,000 new workers and the lowest level since January, when COVID-19 vaccination had only just begun.
Recruitment is likely to lower the fact that the Fed is more patient before reducing asset purchases and will almost certainly prevent a September narrowing announcement. More convenient for longer position by the central bank may potentially slow down recovery US Treasury performance and consider a wide range US dollar index. In theory, this could support Canadian dollars (CAD) and to push USD / CAD exchange rate lower in the coming days, accelerating 400+ point adjustment that began Two weeks ago.
Although the letters seem to be aligned more USD depreciation, it is critical closely monitor market sentiment, as concerns about the air pockets of the US and Chinese economies could trigger a safety response at any time. Needless to say, an exposure can lead to higher volatility and capture growth-related goods (e.g. oil) and consider high beta currencies such as the Canadian dollar.
Another potential headwind for CAD to watch next week is Bank of Canada interest rate decision. Although no fireworks are expected, the institution could be more cautious about the economic recovery Unexpected decline in GDP in the second quarter (Q2 GDP decreased by 1.1% year-on-year vs 2.5% increase in expectations).
As downside risks increase in the current quarter, we will see some amazing changes in the policy statement and perhaps a testament to the fact that it will take longer to close the output gap. But the bank does avoid making significant changes to your outlook trying to stay above fight before the pre-election on 20 September. In this sense, the October meeting, which will be accompanied by new macroeconomic forecasts, may be more relevant and market-moving.
USD / CAD TECHNICAL APPROACHES
USD / CAD has sold off in recent days, falling from an eight-month high of 1.2949 to 1.2518, drop over 400 points in less than two weeks. This lower leg has pushed the pair below the short-term uptrend line and the 200-day moving average, which is a sharp price signal. If sellers retain control of the market next week, we will have a large technical support area 1.2480, which corresponds to the 50% Fibonacci retracement From the 2021 rally. If this floor is decisively removed, we will see a move in the direction of 1.2422, followed by 1.2369.
Alternatively, if the setback occurs unexpectedly, the first cluster obstacle appears in the 1.2650 region. If bulls manage to push prices above this barrier, the buying momentum could accelerate and shift the exchange rate to around 1,807 in July.
USD / CAD TECHNICAL TABLE
EDUCATIONAL INSTRUMENTS FOR TRADE
– Written by DailyFX market strategist Diego Colman