Canadian Dollar Forecast: USD/CAD Coils Ahead of Canada Employment

Canadian Dollar Outlook: USD/CAD

USD/CAD seems to be coiling ahead of Canada’s Employment report as it retraces the decline from the start of the week, and the exchange rate may attempt to test the May high (1.4017) as it breaks out of the June range.

Canadian Dollar Forecast: USD/CAD Coils Ahead of Canada Employment

Keep in mind, USD/CAD cleared the June high (1.3798) as it marked a six-day rally for the first time since February, and the recent advance in the exchange rate may indicate a potential change in trend as the 50-Day SMA (1.3695) no longer reflects a negative slope.

Canada Economic Calendar

However, data prints coming out of Canada may sway USD/CAD as the economy is expected to add 14.5K jobs in July, and a positive development may generate a bullish reaction in the Canadian Dollar as it encourages the Bank of Canada (BoC) to keep interest rates on hold.

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At the same time, a weaker-than-expected employment report may put pressure on the BoC to deliver a rate-cut as the central bank warns that ‘GDP likely declined by about 1.5% in the second quarter,’ and the Canadian Dollar may face headwinds ahead of the September meeting as Governor Tiff Macklem and Co. pledge to ‘support economic growth while ensuring inflation remains well controlled.’

With that said, USD/CAD may retrace the decline from the May high (1.4017) amid the move above the June range, but the exchange rate may face range bound conditions should it track the flattening slope in the moving average.

USD/CAD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/CAD Price on TradingView

• USD/CAD seems to be defending 1.3780 (23.6% Fibonacci extension) as it retraces the decline from the start of the week, with a move/close above 1.3850 (50% Fibonacci extension) bringing the 1.3940 (61.8% Fibonacci retracement) to 1.4000 (61.8% Fibonacci extension) zone on the radar.
• Next area of interest comes in around the May high (1.4017), lack of momentum to hold above 1.3780 (23.6% Fibonacci extension) may push USD/CAD toward the 1.3700 (38.2% Fibonacci extension) to 1.3710 (78.6% Fibonacci retracement) region.
• A move/close below 1.3630 (38.2% Fibonacci extension) may lead to a test of the July low (1.3557), with the next area of interest coming in around the June low (1.3540).

Additional Market Outlooks

Gold Price Climbs Toward July High

Australian Dollar Forecast: AUD/USD Holds Above June Low

British Pound Forecast: GBP/USD Defends Rebound from May Low

US Dollar Forecast: EUR/USD Bounces Back Ahead of June Low

--- Written by David Song, Senior Strategist

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