• Most market participants are waiting for the outcome of the US presidential election.

• Canada’s manufacturing sector expanded further in October.

• Data revealed that the US economy added only 12,000 jobs in October.

The USD/CAD outlook shows caution ahead of the much-anticipated US presidential election. The Canadian dollar remained steady as investors digested Friday’s robust manufacturing business activity report. On the other hand, the dollar eased after Friday’s employment figures solidified bets for a November Fed rate cut.

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There are only two possible outcomes for the US election: a Democratic win for Kamala or a Republican win for Trump. Analysts predict a continuation of current policies with Kamala. Therefore, the outlook for the economy will likely remain unchanged, allowing the Fed to complete its mandate by cutting interest rates. This would lead to a decline in the dollar and USD/CAD.

On the other hand, Trump has proposed some changes to tariffs that would hurt the Canadian dollar. Canada exports most of its products to the US, so tariffs on imported goods would hurt Canada’s economy and the loonie. At the same time, experts believe Trump’s policies will boost inflation, complicating the outlook for Fed rate cuts. In this case, the dollar would rally.

Meanwhile, data on Friday revealed that Canada’s manufacturing sector expanded further, with the PMI reaching 51.1 in October. A rebound in the economy might ease pressure on the Bank of Canada to lower borrowing costs.

In the US, data revealed that the economy added only 12,000 jobs in October. It was a significant drop from the previous reading of 254,000. Therefore, it increased the likelihood of a rate cut in November.

USD/CAD key events today

The pair will start the week quietly, as there are no key events coming from Canada or the US.

USD/CAD technical outlook: Bears strengthen within the bullish wedge

On the technical side, the USD/CAD price is trading in a bullish wedge pattern. However, the price has broken below the 30-SMA, indicating a shift in sentiment. At the same time, the RSI has broken below 50, suggesting stronger bearish momentum.

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Bullish momentum peaked at the start of the wedge pattern. Since then, bulls have gradually lost enthusiasm, leading to a bearish RSI divergence. A break below the wedge support would allow the price to revisit the 1.3825 support level and likely start a downtrend.

https://www.forexcrunch.com/blog/2024/11/04/usd-cad-outlook-cautious-sentiment-ahead-of-us-election-day/