**USD/CAD Forecast: Greenback Strengthens Ahead of Key Economic Data**
Article inspired by MENAFN article, originally written by Christopher Lewis
The USD/CAD currency pair has shown notable strength recently as traders focus their attention on upcoming economic reports that may influence the direction of both the U.S. and Canadian economies. After a period of consolidation in late 2023, the pair gained momentum leading into the first trading days of 2024, reflecting broader sentiment about interest rate policy, commodity prices, and macroeconomic indicators. Technical factors are also aligning to support potential USD strength against the Canadian dollar.
This article takes a deeper dive into the current USD/CAD market outlook by examining technical charts, upcoming economic catalysts, central bank commentary, and broader global trends likely to shape the price trajectory of this important forex pair.
## Technical Analysis: USD/CAD Sees Renewed Momentum
The USD/CAD pair has been resilient over the past few weeks, forming a clear support base and bouncing off key technical levels. Price action in early January 2024 suggests bullish momentum is returning to the U.S. dollar after a short-term correction in December.
**Key Technical Observations:**
– The pair recently found strong support near the 1.3200 zone. This area has acted as a major floor several times over recent months.
– The market is currently trading above the 50-day and 200-day exponential moving averages (EMAs), signaling a broader bullish trend.
– A bullish crossover between the EMAs in mid-December indicated buying interest returning to the pair.
– Momentum indicators such as the Relative Strength Index (RSI) show a gradual upward trajectory, though not yet in overbought territory.
– The 1.3400 level now serves as an area of intermediate support, while traders are watching the 1.3540 and 1.3600 resistance zones on the upside.
Technical traders may be preparing for a potential breakout if economic data catalyzes further U.S. dollar strength. On the flip side, a failure to break resistance levels could see the pair drift back into consolidation.
## Upcoming Economic Reports: Key Events Driving the USD/CAD Pair
With the start of a new year, traders are heavily focused on incoming economic reports expected to shed light on the health of both the U.S. and Canadian economies. The pivotal event on the horizon is the nonfarm payrolls (NFP) report from the United States.
**Major Reports to Watch:**
1. **U.S. Nonfarm Payrolls (NFP):**
– Scheduled for release on January 5, 2024.
– Analysts project a gain of approximately 160,000 jobs for December.
– The unemployment rate is expected to remain at 3.7 percent.
– A hotter-than-expected jobs number would raise concerns that the U.S. Federal Reserve could delay interest rate cuts in 2024.
– A weaker report, on the other hand, could pressure the dollar and support commodity-linked currencies like the CAD.
2. **Canadian Employment Data:**
– Also slated for release on the same day.
– The Canadian economy has shown signs of labor market softness, with earlier reports demonstrating reduced hiring activity.
– Any surprise decline in jobs could weigh on the CAD, especially in the face of a resilient U.S. economy.
3. **U.S. ISM Services PMI and Manufacturing PMI:**
– Indicative of broader economic strength or weakness in the U.S.
– Any strong surprise would reaffirm the dollar’s bullish trend.
4. **Oil Prices and Canadian Trade Balance:**
– Oil remains a crucial driver for the Canadian dollar, given Canada’s position as a leading energy exporter.
– Recent oil price fluctuations due to geopolitical instability in the Middle East and weather-related disruptions have added volatility.
## Central Bank Policies: Diverging Paths Ahead?
A key macro theme influencing the USD/CAD forecast is the
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