USD/CAD Forecast: Loonie Plunging amid Weak USD, Higher Oil Prices

USD/CAD Forecast: Loonie Plunging amid Weak USD, Higher Oil Prices

  • US job openings decreased significantly in August.
  • The US labor market might be starting to loosen amid higher interest rates.
  • Oil prices are on the rise due to possible supply cuts from OPEC+.

Today’s USD/CAD forecast is bearish as data released yesterday showed a cooling in the US labor market due to higher interest rates. This has seen the US dollar falling, boosting the Canadian dollar.

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August saw the largest decrease in US job openings in almost 2-1/2 years. However, this dollar weakness might be short-lived as some believe the Fed will continue its aggressive monetary policy.

“Even as higher interest rates and inflation, and weaker business and consumer confidence are beginning to tamp down labor market activity, the labor market remains healthy,” said Sophia Koropeckyj, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “We expect that the Fed is not yet ready to pause.”

The Canadian dollar is also getting support from the looming supply cuts by OPEC+. Despite pressure from the United States and others to pump more oil, OPEC+ appears prepared to significantly reduce its oil output targets when it meets on Wednesday.

Due to concerns about a worldwide economic slowdown, increasing US interest rates, and a stronger dollar, oil prices have fallen to approximately $90 from $120 three months ago. The probable OPEC+ cut might help them rise again. OPEC+ seeks to reduce production by 1-2 million barrels per day. The US is pressuring OPEC to abandon the reduction, claiming that the fundamentals do not support them.

USD/CAD key events today

From the US, investors are expecting the ADP Nonfarm Employment Change data and crude oil inventories. On the other hand, Canada will release its trade balance for August, which is expected to go up from -70.70B to -67.70B.

USD/CAD technical forecast: More selling pressure to come below the 30-SMA

USD/CAD forecast

The 4-hour chart shows the price trading below the 30-SMA and the RSI below 50. These indicators point to a downtrend. This downtrend comes after bulls showed weakness when they failed to break above the 1.3801 resistance level on three separate attempts.

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This allowed bears to take over, pushing the price below 30-SMA and the RSI below 50. The price has now paused at the 1.3525 key support level. If it respects the 30-SMA as resistance, bears will likely head for a lower low below 1.3525.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.