USD/CAD: Is the loonie a good buy ahead of Canada jobs data?
The USD/CAD exchange rate continued slipping after this week’s interest rate decision by the Bank of Canada (BoC) and the upcoming jobs data. It slipped to a low of 1.300, which was the lowest level since August 30th. It has fallen by 1.56% from the highest level this week.
Canada jobs data aheadCopy link to section
The USD/CAD price continued its downward trend after the BOC decided to deliver another rate hike. As was widely expected, the bank decided to hike rates by 0.75%. It was a smaller increase than the 100 basis point that it hiked in June. It brought rates to 3.25%, meaning that Canada has the highest interest rate in the G7.
In a statement, the BoC announced that it will continue hiking interest rates as it continues to fight the rising inflation. However, there are worries that more hikes will lead to a sharp deterioration of the economy.
The next key catalyst for the USD/CAD pair will be the Canadian jobs numbers scheduled for Friday. Economists expect the data to show that the country’s employment increased to 15k in August after falling by over 30.6k in July. They also expect that the participation rate rose from 64.7% to 64.9% while the unemployment rate rose from 4.9% to 5.0%.
The USD/CAD forex rate has also slipped because of the hawkish tone from the Federal Reserve. On Wednesday, Vice Chair Lael Brainard said that the bank will continue hiking rates in the coming months. Jerome Powell reiterated this view on Thursday, as you can find here.
More Fed officials are expected to reiterate this view on Friday, Charles Evans and Esther George will deliver statements.
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Meanwhile, the pair is also reacting to the performance of crude oil prices. Brent has jumped to $90.42 while West Texas Intermediate (WTI) rose to $84.66.
USD/CAD forecastCopy link to section
The USD to CAD forex pair has been in a strong bearish trend in the past few days. Along the way, the pair moved below the 25-day and 50-day moving averages. It has also moved to the lower side of the Bollinger Bands.
Notably, the pair has formed a cup and handle pattern, which is usually a bullish signal. The current trend is part of the formation of the handle section. However, the bullish signal will become invalid if the pair drops below the support at 1.2987, which was the highest level on August 5. Therefore, a drop below this level will see it continue falling as sellers target the next key support at 1.2900.