- US unemployment claims rose more than expected last week.
- Data revealed a slowdown in the US services sector.
- Oil prices rose on Thursday amid supply concerns.
The USD/CAD outlook points to a bearish trend, with the dollar weakening as a surge in unemployment claims reinforced expectations for a June Fed rate cut. Concurrently, the Canadian dollar is firm, propelled by the upward momentum in oil prices.
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US unemployment claims rose more than expected last week, showing signs of easing in the labor market. Jobless claims rose to 221K from 212K. This report follows another poor one from the previous session, showing weaker economic activity.
On Wednesday, data revealed a slowdown in the US services sector. Although activity levels held above 50, showing expansion, there was a slowdown, indicating service sector demand is declining. Consequently, price increases in this sector might also come down. The recent poor reports have given traders more confidence to bet on a June Fed rate cut.
Canada’s services sector also slowed down in March, falling further into contraction due to higher interest rates. This might pressure the Bank of Canada to start cutting interest rates in June. Investors await next week’s BoC policy meeting for more guidance on the rate cut outlook. However, they expect the central bank to maintain rates at 5% in April.
Meanwhile, oil prices rose on Thursday amid supply concerns after the OPEC group decided to continue with output cuts. Moreover, the group urged member countries to improve their compliance with output cuts. Consequently, oil hit a five-month high, boosting the Canadian dollar.
USD/CAD key events today
After the US jobless claims report, investors will wait for more labor market data tomorrow.
USD/CAD technical outlook: Price is poised to break below a crucial trendline
On the technical side, the USD/CAD price is on the verge of breaking below a strong support trendline. The bearish bias is strong because the price trades well below the 30-SMA, and the RSI soon enters the oversold region.
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For some time now, the price has reached higher lows. However, it has failed to make new highs beyond the 1.3600 critical resistance level. This is a sign that there are a lot of sellers at 1.3600. And now, the trend might change when the price closes below the support trendline. However, bears must break below 1.3450 to make lower lows to confirm a new direction.
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- Source: https://www.forexcrunch.com/blog/2024/04/04/usd-cad-outlook-dollar-drops-as-unemployment-claims-surge/
