**USD/CAD Trades Lower Below 1.3860 as US Jobs Data Looms**
*Adapted and expanded from original reporting by FXStreet*
The USD/CAD currency pair experienced renewed downside pressure during early North American trading on Thursday, remaining suppressed below the 1.3860 level. Market participants shifted their focus to upcoming high-impact macroeconomic data, primarily the US Nonfarm Payrolls (NFP) report, to gain further insights into the trajectory of Federal Reserve monetary policy. Additionally, fluctuating crude oil prices and expectations surrounding Canada’s economic outlook contribute to the volatility of the pair.
This article explores the factors influencing USD/CAD price action, analyzes recent movements in currency and commodities markets, and looks ahead to economic indicators likely to shape sentiment going into the next week.
## USD/CAD Pressured Ahead of Key Economic Reports
Following recent hawkish signals from Federal Reserve officials, the USD/CAD pair initially attempted to recover. However, its upside momentum was capped below the 1.3860 level, with sellers regaining control during Thursday’s European and early US sessions. The underlying negative bias appears to be the result of several intertwined factors:
– Growing investor caution ahead of Friday’s US labor market data, including the NFP, unemployment rate, and average hourly earnings.
– Persistent uncertainty around the pace and timing of the Federal Reserve’s interest rate cuts for 2024.
– Renewed support for crude oil prices, lending strength to the Canadian dollar (CAD).
– Underlying demand for risk assets, pushing down demand for the safe-haven US dollar.
As a result, the USD/CAD pair reversed earlier gains seen in the week and now looks vulnerable to further declines if bearish momentum sustains.
## Recent Price Action and Technical Overview
The USD/CAD pair briefly touched intraday highs on Wednesday but struggled to hold gains, retreating steadily toward 1.3810 on Thursday. The inability to breach resistance near 1.3860 points to a strong selling zone. Technically, the following observations are noteworthy:
– Immediate support is located near 1.3800: A decisive break below this level could open doors for further losses toward 1.3730 and ultimately 1.3680.
– On the upside, key resistance is seen around 1.3860 and subsequently at 1.3900: A breakout above this zone could signal bullish resumption, targeting 1.3940 and then 1.4000.
– The Relative Strength Index (RSI) on the 4-hour and daily charts has turned south, suggesting weakening bullish momentum.
From a short-term prognostic perspective, the pair’s trajectory hinges largely on jobs data and Fed rate expectations.
## Fed Policy and US Economic Backdrop
The overarching driver for the US dollar in recent weeks has been speculation regarding when and how aggressively the Federal Reserve might start cutting interest rates in 2024. Mixed US economic data has led to conflicting interpretations on the health of the labor market and inflation trends:
– On Wednesday, the ADP National Employment Report showed that private employers added 103,000 jobs in November, missing the expected 130,000 figure.
– Job Openings and Labor Turnover Survey (JOLTS) data earlier this week showed a decline in job vacancies to multi-year lows, suggesting a cooling labor market.
Despite signs of softness in the labor market, Federal Reserve Chair Jerome Powell and other Fed officials continue to express caution. The Fed maintains that its policy decisions will remain data-dependent and that premature loosening of monetary conditions could jeopardize progress made in curbing inflation.
The US NFP report due Friday is expected to show that employers added approximately 180,000 jobs in November, with unemployment forecasted to remain steady at 3.9%. Average hourly earnings are projected to increase by 0.3% month-over-month, providing insight into wage-driven inflation.
A weaker-than-expected jobs report could:
– Bolster market hopes for
Read more on USD/CAD trading.