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  • Wage growth slowed in the US, renewing hopes of a Fed pause.
  • The Canadian economy added a significant number of jobs in December.
  • There is a high chance that the BoC will hike rates by 25bps.

Today’s USD/CAD outlook is bearish as the pair extends Friday’s move. The loonie rose on Friday after a major US jobs report indicated that wage growth slowed in December. This fueled investor expectations that inflation is receding and that the Federal Reserve does not need to be as aggressive as some had anticipated. 

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According to official data released on Friday, the Canadian economy added a significant number of jobs in December, and the unemployment rate unexpectedly dropped, which increased the possibility that the Bank of Canada will hike rates again this month.

According to figures from Statistics Canada, the economy added a net 104,000 jobs in December, considerably above economists’ predictions, and the unemployment rate dropped from 5.1% in November to 5%.

Analysts had expected eight thousand new jobs overall and an increase in the unemployment rate of 5.2%.

According to Statscan, full-time employment, particularly among young people aged 15 to 24, was a major contributor to the increase in employment and was spread across industries.

The Bank of Canada has stated that it will be more data-dependent when deciding the policy rate after raising rates at a record pace of 400 bps in nine months to 4.25% last year.

According to Andrew Grantham, senior economist at CIBC Capital Markets, the positive jobs report increases the likelihood that the central bank will lift interest rates by another 25 basis points in January.

Since the data release, the probability of a 25-bp rate increase in January has increased from about 60% to 75%.

USD/CAD key events today

There won’t be any significant news announcements from the US or Canada today. Investors will therefore continue to scrutinize Friday’s releases.

USD/CAD technical outlook: Support at the 1.3400 level

USD/CAD outlook

USD/CAD is in a strong bearish move, breaking below support levels without pause. The price is trading far below the 30-SMA, pointing to strength in the move. There is strong bearish momentum, as seen in the RSI, which trades below 50.

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The price is currently trading at the 1.3400 key psychological level. This might allow bulls to come in for a retracement move. Such a move would likely retest the 1.3475 level before continuing lower.

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