• The US recorded a smaller-than-expected 7.67M job vacancies in July.
• Investors raised the likelihood of a 50 bps Fed rate cut to 45%.
• The Bank of Canada cut rates by 25 bps on Wednesday as expected.

The USD/CAD forecast points to renewed dollar weakness after downbeat data raised the likelihood of a super-sized September Fed rate cut. At the same time, the Canadian dollar firmed with oil after reports of a possible delay in the October OPEC+ output increase.

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Data on Wednesday showed that the US recorded 7.67M job vacancies in July. The figure reached a three-and-a-half-year low and missed estimates of 8.09M. Notably, the Fed is paying close attention to the labor market. Initially, this sector was the main driver of inflation. However, this has changed, and the labor market is showing weakness. Consequently, investors raised the likelihood of a 50 bps rate cut to 45%. As a result, the dollar slipped, pushing the USD/CAD pair lower.

All eyes are now on the all-important nonfarm payrolls report. Economists expect some improvement from last month’s poor report. Therefore, any miss will likely cause a lot of market turmoil. The unemployment rate shows the risk of a recession. Thus, another unexpected jump could raise recession worries, further hurting the dollar. At the same time, it will solidify bets for a more significant rate cut.

Meanwhile, as expected, the Bank of Canada cut rates by 25 bps on Wednesday. The Canadian dollar rose as investors had already priced such a move. Furthermore, the currency got support after reports that OPEC+ is discussing delays to its planned October output increase. This news lifted oil prices because of prolonged market tightness.

USD/CAD key events today

• US ADP nonfarm employment change
• US unemployment claims
• US ISM services PMI

USD/CAD technical forecast: Price action points to bearish strength

On the technical side, the USD/CAD price is on the verge of breaking below the 30-SMA, indicating a looming sentiment shift. Before this, the bulls were in the lead and heading for the 1.3600 resistance level. However, price action suddenly changed, and bears made a large candle, indicating a surge in momentum. At the same time, the RSI dipped into bearish territory below 50.

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If the price breaks below the SMA, it will likely retest the 1.3450. A break below this level would indicate a continuation of the previous downtrend.

https://www.forexcrunch.com/blog/2024/09/05/usd-cad-forecast-odds-for-50-bps-cut-after-dismal-jobs-data/