- USD/CAD consolidates near two-week low as traders await the US NFP report.
- Fed rate cut bets and US fiscal concerns weigh on the USD, capping the major.
- Retreating Crude Oil prices undermine the Loonie and lend support to the pair.
The USD/CAD pair oscillates in a narrow band near the 1.3600 mark through the first half of the European session on Thursday as traders opt to wait for the crucial US monthly employment details. The popularly known Nonfarm Payrolls (NFP) report will provide a fresh insight into the health of the US labor market and drive expectations around Federal Reserve (Fed) policy. This, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the currency pair.
Heading into the key data risk, the Automatic Data Processing (ADP) reported on Wednesday that US private payrolls fell for the first time in more than two years in June. In fact, the US private-sector employment unexpectedly declined by 33K compared to 29K in May. This comes on top of Tuesday’s Job Openings and Labor Turnover Survey, or JOLTS report, and underscores a deteriorating trend in the US labor market, suggesting that weaker jobs data could negatively impact the USD against the backdrop of dovish Fed expectations.
Traders are currently pricing in nearly a 25% chance of a rate cut by the Fed at the July 29-30 meeting. Furthermore, a 25 basis point rate cut in September is all but certain, and expectations for two rate reductions by the end of this year are also high. Meanwhile, US President Donald Trump called for the Fed Chair Jerome Powell to quit immediately. This further raises concerns about the central bank’s independence, which, along with concerns about the worsening US fiscal conditions, keeps the USD depressed near a multi-year low.
However, the emergence of fresh selling around Crude Oil prices is seen undermining the commodity-linked Loonie and acting as a tailwind for the USD/CAD pair. Nevertheless, the fundamental backdrop suggests that any immediate reaction to a positive report is likely to be short-lived. Hence, any attempted recovery might still be seen as a selling opportunity and run the risk of fizzling out rather quickly.
USD/CAD 4-hour chart
Technical Outlook
From a technical perspective, the recent repeated failure near the 200-period Simple Moving Average (SMA) on the 4-hour chart and the formation of a descending channel validate the negative outlook for the USD/CAD pair. Moreover, oscillators on the said chart are holding deep in negative territory and are still away from being in the oversold zone. Bearish traders, however, might wait for a sustained break below the trend-channel support, currently pegged near the 1.3575-1.3570 area, before placing fresh bets. Spot prices might then accelerate the downward trajectory towards testing the June monthly swing low, around the 1.3540 region, before eventually dropping to the 1.3500 psychological mark.
On the flip side, the 1.3655-1.3660 area now seems to have emerged as an immediate hurdle, above which the USD/CAD pair could aim to reclaim the 1.3700 round figure. The latter represents a confluence hurdle comprising the top boundary of the channel and the 200-SMA on H4. Hence, a sustained move beyond might shift the near-term bias in favor of bullish traders and pave the way for a move towards the 1.3765-1.3770 hurdle en route to the 1.3800 mark.
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