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  • The dollar index started in 2023 slowly and was most recently down 0.029% at 103.610.
  • The dollar index increased 8% last year, its largest annual increase since 2015.
  • Oil prices dropped from their highest points in a month amid disappointing Chinese economic data.

Today’s USD/CAD outlook is bearish as the dollar’s weakness boosts the Canadian dollar. The dollar index, which compares the dollar value to six major currencies, started in 2023 slowly and was most recently down 0.029% at 103.610.

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Due to the Fed hiking interest rates to combat inflation, the dollar index increased by 8% last year, its largest annual increase since 2015.

The employment market in the United States is expected to remain tight when the payroll data is revealed on Friday.

According to economists at ING, the Fed had emphasized the significance of the payroll figures for the inflation outlook. Still, they pointed out that wage growth had not generated inflation and would not be the reason why it ultimately declined.

A drop in oil prices capped the Canadian dollar’s increase. Tuesday saw oil prices drop from their highest points in a month amid disappointing Chinese economic data and a warning from the IMF’s chief about a harder 2023.

Prices were impacted by weaker manufacturing data from China, the second-biggest user of oil and the world’s largest importer of petroleum.

Additionally, according to IMF Managing Director Kristalina Georgieva, all three major global growth drivers—the United States, Europe, and China—are slowing concurrently, making the year 2023 more challenging than 2022 for the world economy.

USD/CAD key events today

There won’t be any key economic releases from the US or Canada today, so the pair might consolidate.

USD/CAD technical outlook: Bulls emerging at strong support zone

USD/CAD outlook

USD/CAD is trading close to the 30-SMA in the 4-hour chart after finding strong resistance at the 1.3600 key level. Bears have shown their strength after making a big-bodied bearish candle from the 1.3600 resistance. This strength can also be seen in the RSI, which has crossed below 50.

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However, bears face a strong support zone comprising the 30-SMA, the trendline, and the 1.3537 key level. The price will likely take out the 1.3500 support if bears break below the support zone. If not, there will be a retest of the 1.3600 level.

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