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  • Powell stated that the Fed might start slowing rate hikes as soon as December.
  • Fed funds futures traders expect the Fed funds rate to peak at 4.95% in May.
  • ADP National Employment report revealed that US private payroll growth in November was far less than anticipated.

Today’s USD/CAD outlook is bearish as the dollar extends yesterday’s losses. The dollar fell on Wednesday due to remarks made by Federal Reserve Chairman Jerome Powell suggesting the American central bank may slow the rate of interest rate increase “as soon as December.”

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“We think slowing down at this point is a good way to balance the risks,” Powell said at the Brookings Institution in Washington.

Powell emphasized that the fight against inflation was still far from done and that important questions remained unanswered, including how far and for how long rates will need to climb.

Fed funds futures traders now expect the Fed funds rate to peak at 4.95% in May as opposed to predictions for a top of 5.06% in June before the speech. Markets expect the Fed to raise rates by 50bps at the December meeting.

The dollar had fallen earlier on Wednesday when the ADP National Employment report revealed that US private payroll growth in November was far less than anticipated, indicating that demand for labor was slowing under high interest rates.

Other figures also indicated a decline in US job openings in October.

USD/CAD key events today

Investors will watch US data, such as the ISM manufacturing PMI, the core PCE price index, and initial jobless claims.

USD/CAD technical outlook: Shift in sentiment

USD/CAD outlook

Looking at the 4-hour chart, we see the price trading below the 30-SMA and RSI below 50, all signs that bears are in the lead. The bullish move stopped at the 1.3600 resistance level, where bears took over. There was a short pause at 1.3500 before the price fell and broke below the 30-SMA on a strong momentum candle. This confirmed a shift in sentiment from bullish to bearish.

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The price is currently trading below the SMA. If bears can gather enough momentum for a strong move, they will look to take out the 1.3325 support level. A bearish trend will be confirmed if the price makes lower highs and lower lows.

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