USD/CAD Shows Mild Positivity Around 1.3670

Key Points:

USD/CAD Technical Analysis: Below 200-hour SMA, mild positive bias at 1.3670 level, struggle for upward momentum.
NFP Report Expectations: 185,000 jobs in May, unemployment steady at 3.9%, significant for USD demand and Fed policy.
Market Sentiment: Leaning towards Fed rate cut in September, US slowdown affects USD, oil prices support CAD.

The USD/CAD currency pair is presently navigating through a challenging phase as it remains below the crucial 200-hour Simple Moving Average (SMA). This technical indicator signifies a need for upward momentum, reflecting the pair’s struggle to attract meaningful buyers. Despite the prevailing bearish undertone, there is a mild positive bias around the 1.3670 level. Traders are cautiously optimistic, hoping for a potential recovery, but the pair’s immediate outlook remains uncertain.

May NFP to Show 185K Jobs Added, 3.9% Unemployment

The NFP report is expected to show that 185,000 jobs were added in May, slightly up from the 175,000 jobs added in the previous month. Additionally, the unemployment rate is projected to rise to 3.9%. These figures are critical as they influence inflation trends, the Federal Reserve’s policy decisions, and overall USD demand. A stronger-than-expected NFP could bolster the USD, whereas a weaker report might lead to a decline, directly impacting the USD/CAD pair’s direction.

September Rate Cut Likely as Market Sentiment Shifts

Market sentiment suggests a greater likelihood of the Federal Reserve implementing an interest rate cut in September due to signs of a slowing US economy. This expectation has resulted in depressed US Treasury bond yields, consequently weakening the USD. Conversely, a rebound in crude oil prices supports the Canadian Dollar (Loonie), capping the USD/CAD pair’s upside. This interplay of factors highlights the pair’s sensitivity to broader economic indicators and commodity price movements.

BoC Cuts Rate After 4 Years, Limits USD/CAD Upside

The Bank of Canada recently lowered its benchmark interest rate for the first time in four years, moving from levels that were at more than a two-decade high. Concerns over slowing economic growth drove this decision despite acknowledging improvements in underlying inflation. Speculation is rife about the potential for further rate reductions, which could cap the Canadian Dollar’s upside and provide a tailwind for the USD/CAD pair. Market participants will closely monitor the BoC’s statements for hints about future monetary policy adjustments.

USD/CAD Remains Range-Bound, Caution Advised

Given the mixed fundamental backdrop, traders should exercise caution when trading the USD/CAD pair. The price is expected to stay range-bound, reflecting modest weekly gains and the familiar range since early May. This stability suggests that only new, impactful economic data can cause significant moves. Traders should remain vigilant and adaptable, ready to respond to fresh developments that could shift market dynamics and influence the USD/CAD pair’s trajectory.