The USD/CAD pair is facing continued selling pressure, hovering near its lowest level since April 10. The Canadian Dollar (CAD) has been gaining strength as the gap between Canada’s 2-year rate and the US equivalent narrows. Investors are anticipating aggressive policy easing from both the Federal Reserve (Fed) and the Bank of Canada (BoC), with a larger-than-normal rate cut expected in September. This has led to a 38% probability of a 50 basis points rate cut next month and about 100 bps worth of easing by the end of the year, according to the CME Group’s FedWatch Tool.
The recent report on the US labor market, showing fewer job additions than estimated, has further supported the case for lower US interest rates. The minutes of the July FOMC meeting also revealed a strong consensus among officials for an interest rate cut in September. Despite bearish Crude Oil prices, which typically weaken the Loonie, the USD/CAD pair is struggling to gain traction.
Looking ahead, market participants are awaiting key US economic data releases and Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium for further clarity on the interest rate outlook. From a technical perspective, the USD/CAD pair faces resistance near the 1.3600 mark, while support lies at the 1.3535 horizontal zone. A break below this level could lead to further downside towards the 1.3400 round figure.
Analysis and Breakdown
The USD/CAD pair is currently facing downward pressure due to expectations of aggressive policy easing from both the Fed and the BoC. This has led to a narrowing gap between Canada’s 2-year rate and the US equivalent, favoring the Canadian Dollar. As investors anticipate lower US interest rates, the USD/CAD pair remains near multi-month lows.
Key factors impacting the pair include the recent report on the US labor market, which showed weaker job additions than expected, and the minutes of the July FOMC meeting, which signaled a strong consensus for an interest rate cut in September. Despite bearish Crude Oil prices, typically negative for the Loonie, the USD/CAD pair is struggling to find support.
Looking ahead, market participants are focused on upcoming US economic data releases and Fed Chair Jerome Powell’s speech for further guidance on the interest rate outlook. From a technical perspective, the pair faces resistance near 1.3600 and support at 1.3535. A break below support could lead to further downside towards 1.3400.