**USD/CAD Outlook: Canadian Jobs Data Takes Center Stage for Loonie Traders**
*Original insights courtesy of FXStreet and ING*
The Canadian dollar (CAD) remains under focus as markets await fresh labor market data from Canada, scheduled for release on Friday. The upcoming employment readings are expected to play an essential role in shaping the near-term trajectory of the USD/CAD currency pair. With global investors weighing central bank policies and economic divergence between Canada and the United States, the labor report could influence interest rate expectations and provide direction for the Canadian dollar.
### Key Takeaways
– Canadian labor market data to be released Friday draws significant attention.
– ING analysts expect the data to be instrumental in shaping Bank of Canada’s (BoC) policy outlook.
– USD/CAD currently trading near 1.37 as sentiment swings between risk appetite and monetary policy expectations.
– A strong jobs number could support the CAD while a weak report may boost USD strength.
– Broader global developments such as U.S. Federal Reserve policy, oil prices, and general risk sentiment are also critical to USD/CAD performance.
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### Market Context
The Canadian dollar has been under pressure in recent weeks, largely dragged down by a combination of global risk-off sentiment, falling oil prices, and relatively dovish expectations for the Bank of Canada. On the flip side, a more robust U.S. economic outlook has bolstered the greenback. The net effect has been upward pressure on the USD/CAD pair, pushing it near the 1.37 level. With bond yields retreating and central banks nearing the end of their tightening cycles, a key differentiator has become labor market performance.
### Canadian Employment Preview
Canada’s employment report, set for release on November 10, is among the most critical macroeconomic releases ahead of the next Bank of Canada rate decision. Expectations for the report are:
– **Employment Change (October 2023):** Consensus is forecasting a net addition of around 22,000 jobs.
– **Unemployment Rate:** Expected to tick up slightly to 5.6 percent from 5.5 percent in September.
– **Wage growth for Permanent Employees:** Seen as a critical marker for inflation persistence.
A strong jobs report could prompt BoC officials to hold off on any dovish pivot, reinforcing market perceptions that interest rates will need to remain elevated for a longer period of time. Conversely, disappointing data may reinforce expectations of rate cuts in 2024.
### ING’s Perspective
Analysts at ING believe Friday’s Canadian jobs report will carry significant implications for the CAD. Their report notes:
> “The loonie remains slightly vulnerable into the jobs numbers this Friday. A soft labor market print could reignite rate cut speculation for early 2024 and might push USD/CAD upward again, even challenging the 1.38 level,” ING stated.
Their base case leans toward neutral to mild CAD weakness heading into the jobs release, given the global risk backdrop and soft oil prices. However, they also note that positive employment data could provide the necessary support to stabilize or even rally the Canadian dollar.
### USD/CAD Technical Analysis
Technical indicators suggest that USD/CAD remains in an upward bias but faces resistance near the 1.38 level. Key technical levels to watch:
– **Resistance Levels:**
– 1.3750: Near-term resistance based on recent highs.
– 1.3800: Psychological level that could become a target if the loonie weakens.
– **Support Levels:**
– 1.3620: Recent pivot low and 20-day moving average.
– 1.3550: 50-day moving average and historical support zone.
Momentum indicators such as the Relative Strength Index (RSI) are currently hovering near neutral, suggesting potential for volatility based on incoming economic data.
### Bank of Canada Policy Outlook
The BoC kept interest rates steady at 5.00 percent during its October policy meeting,
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