- Data on Thursday showed that inflation jumped more than expected in September.
- US unemployment claims increased to 258,000 compared to estimates of 230,000.
- Canada’s economy might add 29,800 jobs, an increase from the previous 22,100.
The USD/CAD outlook shows a strong rally in the pair as the dollar shines amid upbeat economic data. At the same time, Fed rate cut expectations are slowly dropping, introducing the likelihood of a pause in November. Meanwhile, CAD remained fragile ahead of crucial domestic employment figures.
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The US dollar has regained its attractiveness in recent weeks due to better-than-expected economic data. A resilient economy has pushed investors to slash bets for a rate cut at the November Fed meeting.
For instance, data on Thursday showed that inflation jumped more than expected in September. The monthly figure rose by 0.2%, above estimates of 0.1%. Meanwhile, the annual figure increased by 2.4%, while economists had expected a 2.3% increase.
However, a separate report revealed weaker labor market conditions. Notably, unemployment claims increased to 258,000 compared to estimates of 230,000. Nevertheless, by the end of the day, market participants were pricing a higher 20% chance of a Fed pause in November.
The US economy has shown resilience at a time when most had expected deterioration. If this trend continues, the Fed will likely achieve a soft landing. However, this can only happen if inflation continues dropping to the 2% target.
Meanwhile, the Canadian dollar fell against the dollar despite recent rallies in oil. Markets are awaiting Canada’s monthly employment figures. According to forecasts, the economy might add 29,800 jobs, an increase from the previous 22,100. Meanwhile, the unemployment rate might increase from 6.6% to 6.7%.
USD/CAD key events today
- US Core PPI m/m
- US PPI m/m
USD/CAD technical outlook: Strong rally eying 1.3800 resistance
On the technical side, the USD/CAD price has skyrocketed to new highs, breaking past key resistance levels. The climb has placed the price well above the 30-SMA, supporting a strong uptrend. At the same time, the RSI trades in the overbought region, indicating solid bullish momentum. Moreover, the price has risen without significant pullbacks to retest the 30-SMA. This is a sign that the uptrend is steep.
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Given the strong bullish bias, the price might soon reach the 1.3800 resistance level. However, since it is overbought, it might pause and pull back before continuing the uptrend.
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