The Canadian Dollar gains as Oil rally offsets jobs gloom

The Loonie gains some traction versus the Greenback, while the latter posts modest losses, as US and Canadian financial markets remain closed in observance of Labour Day. Nevertheless, the USD/CAD edges lower by some 0.15%, trading at 1.3813 at the time of writing.

USD/CAD slips as Oil strength offsets soft Canadian jobs.

Last week, employment data in Canada revealed that the economy lost 41.7K workers, while the Unemployment Rate remained steady at 6.4%. This pushed USD/CAD higher as US Nonfarm Payrolls crushed estimates, with July’s print providing a leg-up that has so far been faded.

Last week’s unexpectedly strong Nonfarm Payrolls report for August confirmed Fed Chair Kevin Warsh’s statement that the jobs market is “consistent with full employment.”

Geopolitics are poised to continue to drive price action. The escalation of the US-Iran war increased upward pressure on energy prices, which typically correlate positively with the Canadian Dollar, suggesting further downside for the USD/CAD pair.

USD/CAD to be influenced by interest rate differentials

Given the backdrop, the Federal Reserve is expected to raise rates by 25 basis points, according to Prime Terminal data. Odds are at 63% to hike to 3.75% - 4$, while for holding rates, stand near 37%.

Regarding the Bank of Canada (BoC), money markets had priced in a near 70% chance of a hold at 2.25% and a slim 30% chance of a rate hike.

Although the data was positive and the US Dollar strengthened after NFP, the move faded as investors await US inflation data on the producer and consumer sides on Thursday and Friday, respectively.

Ahead of the economic calendar, it would remain absent in Canada but not so in the US. The release of inflation data on the producer and consumer side, along with jobs data and Consumer Sentiment, will provide clues about the status of the economy.

USD/CAD Price Forecast: Technical Outlook

In the daily chart, USD/CAD trades at 1.3816, maintaining a soft bearish bias as it holds below the clustered simple moving averages around 1.3999 and beneath the descending trend-line resistance drawn from 1.4248, now coming in near 1.3942. The pair still respects an underlying upward support trend line from 1.3526, but a Relative Strength Index (14) reading near 41 hints that rallies remain vulnerable while price stays capped under these overhead levels.

On the topside, initial resistance is seen at the downward resistance trend line around 1.3942, with the simple moving average cluster near 1.3999 acting as the next barrier that would need to be reclaimed to ease the current bearish pressure. On the downside, immediate support aligns with the ongoing upward trend-line zone just under the market around 1.38, with deeper levels traced back toward the former break region near 1.3598 and the trend-line origin around 1.3526 if selling extends.