The US dollar weakened broadly yesterday following softer-than-expected ADP employment data and a Bloomberg report suggesting that Kevin Hassett has emerged as the frontrunner for the Federal Reserve Chair position.
The greenback had already been under pressure after Fed official John Williams endorsed a rate cut in December last Friday. Markets now assign a 76% probability to a December rate cut, making it appear almost certain.
With limited data releases before the upcoming FOMC meeting, market attention will focus primarily on US weekly jobless claims and the ADP employment report. Weaker data is likely to continue weighing on the dollar, while stronger figures could offer some short-term support. Ultimately, however, the key drivers will be the FOMC’s policy decision and subsequent releases of the US Nonfarm Payrolls and Consumer Price Index reports.
On the Canadian dollar front, the Bank of Canada (BoC) recently cut interest rates by 25 basis points as expected, lowering its policy rate to 4.25%. This brings the rate to the lower limit of the BoC’s estimated neutral range of 2.25% to 3.25%. Although the central bank indicated that its rate-cutting cycle is likely over, it left the door open for further cuts if necessary.
Recent economic data supports a pause in rate changes, with a strong Canadian employment report and inflation data showing the Trimmed Mean CPI year-on-year holding steady around 3%.
USDCAD Technical Analysis – Daily Chart
On the daily chart, USDCAD recently bounced off an ascending trendline and extended gains toward recent highs. Should the pair pull back again, buyers are expected to defend the trendline with a clearly defined risk threshold below it, aiming to push prices to new highs. Conversely, sellers would need a break below the trendline to accelerate a decline towards the 1.3887 level.
USDCAD Technical Analysis – 4-Hour Chart
On the 4-hour chart, a minor support zone exists around 1.4060. Buyers are likely to enter at this level, maintaining a defined stop-loss just below, targeting a rally towards recent highs. Sellers will be looking for a break below this support to increase downside momentum toward the major ascending trendline.
USDCAD Technical Analysis – 1-Hour Chart
The 1-hour chart shows a minor downward trendline outlining the recent pullback. Sellers are expected to continue using this trendline to drive prices lower, while buyers will look for a breakout above it to extend bullish momentum towards the 1.4130 resistance level. The red lines on this chart mark today’s average daily trading range.
Upcoming Economic Catalysts
Today’s key release is the latest US weekly jobless claims data. Tomorrow, the US observes the Thanksgiving holiday, which is likely to reduce market liquidity and lead to range-bound trading in the latter part of the week. The week concludes on Friday with the release of Canada’s GDP report, another important data point for CAD traders.
Original Source: Giuseppe Dellamotta of investinglive.com
