- The monthly US employment report showed a surge in the unemployment rate to 4.1%.
- Canada’s labor market weakened sharply, with the economy losing jobs in June.
- Next week, investors will only focus on US inflation data.
The USD/CAD weekly forecast is bearish as the dollar falls amid a series of downbeat reports and a dovish Powell.
Ups and downs of USD/CAD
The USD/CAD pair had a bearish week as the dollar weakened due to poor economic data. At the same time, Powell’s slightly dovish speech weighed on the currency.
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US figures showed a drop in job vacancies, higher initial jobless claims, and a weaker service sector. Moreover, the monthly employment report showed a surge in the unemployment rate to 4.1%. An easing labor market will allow the Fed to start lowering borrowing costs.
Furthermore, when Powell spoke, he acknowledged the recent decline in inflation. He said it would pave the way for rate cuts. Meanwhile, Canada’s labor market weakened sharply, with the economy losing jobs in June. At the same time, the unemployment rate rose to 6.4%.
Next week’s key events for USD/CAD
Next week, investors will only focus on US inflation data. The consumer and wholesale inflation reports will show the state of price pressures in the country. Last month, consumer inflation eased to 3.3%. Moreover, the Fed’s preferred measure of inflation fell to 2.6% in May, a sign that the 2% target is within reach.
If next week’s reports continue this downtrend, there will be an increase in Fed rate cut expectations. This would weaken the dollar against the loonie. On the other hand, if inflation beats forecasts, the dollar will rally as the Fed will likely keep delaying cuts.
USD/CAD weekly technical forecast: Bears challenge range support
On the technical side, the USD/CAD price is bearish as it trades below the 22-SMA with the RSI below 50. However, there is no clear direction in the market since the price has mostly traded sideways, with support at 1.3601 and resistance at 1.3800. The previous bullish trend failed to break above the 1.3800 resistance and entered a period of consolidation.
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Bears are now testing the 1.3601 support level. If the bears break below this level next week, the price will likely retest the 1.3400 key support. However, if bears fail to continue lower, USD/CAD will keep consolidating.
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- Source: https://www.forexcrunch.com/blog/2024/07/07/usd-cad-weekly-forecast-dollar-slips-amid-weak-nfp/
