• Problems in the banking sector added to speculation of US rate cuts later this year.
  • The Fed increased rates by 25bps and hinted that it might halt its rapid tightening cycle.
  • The Bank of Canada is prepared to raise interest rates further.

Today’s USD/CAD price analysis is bearish. The dollar was broadly weaker on Friday as banking sector woes added to speculation of US rate cuts later this year. This comes ahead of the highly anticipated US nonfarm payrolls report.

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Growing predictions that the Fed will lower interest rates later this year have dampened the dollar’s outlook. Recent banking turmoil in the United States has increased the likelihood of a recession and increased speculation that the Fed may soon change direction.

On Wednesday, the Fed increased rates by 25bps and hinted that it might halt its rapid tightening cycle.

On Thursday, Governor Tiff Macklem stated that the Bank of Canada would raise interest rates further if inflation gets stuck far above the 2% target.

The bank said in January that it would halt its tightening effort and refrain from raising rates if inflation declined as anticipated.

Last month, the Bank of Canada maintained its benchmark overnight interest rate at 4.50%. However, it warned that rates could need to stay high for some time due to wage pressure in a competitive labor market and sticky service prices.

According to Macklem, the bank’s base case is that the labor market will loosen up when growth slows, and businesses will stop setting prices aggressively.

USD/CAD key events today

Investors are awaiting employment data from the US and Canada. The US will release the nonfarm payrolls report, while Canada will release its employment change report. These reports will give a clear picture of their labor markets.

USD/CAD technical price analysis: Bears confirm reversal by breaking below 1.3530.

USD/CAD technical price analysis
USD/CAD technical price analysis chart

There has been a significant shift in sentiment for USD/CAD in the 4-hour chart. The price has not only fallen below the 30-SMA but has also started making lower lows and highs. The RSI is also below 50, supporting bearish momentum.

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Bulls gave up control at the 1.3650 resistance level. The next attempt at this resistance failed to make a higher high but made a lower one. Finally, the price broke below the 1.3530 support level to make a lower low. The next target for bears is 1.3450.

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Source: https://www.forexcrunch.com/usd-cad-price-analysis-bearish-below-1-3500-eying-jobs-data/