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  • Canada’s economy created 108,300 jobs in the past month, beating forecasts.
  • Markets expect the BoC to raise rates by 50bps in December.
  • Canada’s government spending plan threatens to undo BoC’s efforts in taming inflation.

Today’s USD/CAD outlook is bearish. Canada’s government announced a huge increase in employment on Friday, raising the possibility that the Bank of Canada may have to raise interest rates for the sixth consecutive meeting next month.

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According to figures from Statistic Canada, the economy created a net 108,300 jobs in the past month, above predictions of 10,000 new positions. The unemployment rate remained steady at 5.2%.

The unexpected positive employment data came only one week after the Bank of Canada shocked the markets by raising interest rates by a smaller-than-anticipated 50 basis points to 3.75%, signaling that the tightening cycle was about to peak. The labor market clearly needs more work.

Despite Finance Minister Chrystia Freeland’s pledge not to make the task of monetary policy tougher, economists said Canada’s plan to spend an additional C$6.1 billion ($4.5 billion) over the next five months might hinder the central bank’s attempt to control inflation.

According to current financial market sentiment, the BoC is expected to increase its policy rate by half a percentage point on December 7. Although Canadian inflation has decreased from 8.1% to 6.9%, it is still far higher than the BoC’s target of 2%, and underlying pressures are proving difficult to ease.

USD/CAD key events today

Investors will pay attention to Mester, a member of the Federal Open Market Committee (FOMC), who is set to speak later in the day.

USD/CAD technical outlook: Bears threaten to break below 1.3501

USD/CAD outlook

Looking at the 4-hour chart, we see the price trading far below the 30-SMA and the RSI below 50, showing a bearish trend. The price attempted to trade above the 1.3750 resistance level but was promptly rejected. Bears took over, pushing the price below the 30-SMA and the 1.3600 support level.

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The price is currently paused at the 1.3501 support. There is still a lot of bearish momentum, which could mean a break below this level. If this is not the case, the price will retest the 1.3600 in a retracement move before taking out the 1.3501 support.

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