• US service PMI data came in at 54.9, well above the forecast of 51.7.

• Market participants are pricing a 65% chance of a 25-bps rate cut in November.

• Canada’s services PMI fell from 47.8 to 46.4 in August.

The USD/CAD price analysis shows bulls charging ahead as the dollar firms after upbeat US business activity data and ahead of the nonfarm payrolls. At the same time, a shift in the Fed’s policy outlook and Middle East tensions supported the greenback. Meanwhile, the loonie was weak after downbeat business activity data.

On Thursday, the dollar got a boost from service PMI data, which came in at 54.9, well above the forecast of 51.7. Strong business activity in the services sector indicates a robust economy. Consequently, the Fed might prefer a gradual pace for rate cuts. As a result, market participants are pricing a 65% chance of a 25-bps rate cut in November.

Moreover, Powell recently confirmed that the Fed would move at a slower pace with two small cuts before the year ends. However, as more data comes in, this outlook could change.

The next report will show job growth and unemployment in the US in September. Analysts believe the economy will add 148,000 workers while the unemployment rate holds at 4.2%. An unexpected outcome could cause volatility, impacting Fed rate cut expectations.

Elsewhere, Middle East tensions kept demand for the dollar high. Meanwhile, although oil also rose, the Canadian dollar fell due to poor economic data. Canada’s services PMI fell from 47.8 to 46.4 in August. A poor economy means more rate cuts that will hurt the loonie.

USD/CAD key events today

• US average hourly earnings m/m
• US nonfarm employment change
• US unemployment rate

USD/CAD technical price analysis: Aiming for 1.3580

On the technical side, the USD/CAD price is rallying after bouncing off the 1.3475 key support level. The price is climbing above the 30-SMA, supporting a bullish bias. At the same time, the RSI trades on the upper side of the bullish territory. Therefore, it might soon reach the overbought region, which happens when the price is in a solid uptrend.

If this move continues, it might pause at the 1.3580 key resistance level. Here, it might pull back to retest the 30-SMA before the uptrend continues. A break above 1.3580 would strengthen the bullish bias.

https://www.forexcrunch.com/blog/2024/10/04/usd-cad-price-analysis-dollar-gains-momentum-ahead-of-nfp/