09.09.202412:43 Forex Analysis & Reviews: USD/CAD. Analysis and Forecast

Today, the USD/CAD pair is trying to continue building on its Friday gains. Crude oil prices are also trying to gain positive momentum, moving away from the lowest levels seen in 2023.

This supports the commodity-linked Canadian dollar, limiting the pair's upward potential. OPEC+ has postponed plans to increase production by 180,000 barrels per day until December. However, it has not managed to calm the market regarding global supply due to concerns about a slowdown in oil demand from China, the world's largest crude oil importer. Additionally, the potential for a hurricane along the U.S. Gulf Coast, which accounts for about 60% of U.S. refining capacity, is impacting both the oil market and the commodity-linked Canadian dollar.

The Canadian dollar is under pressure due to weaker employment data from Canada, which was released on Friday, increasing hopes for further interest rate cuts by the Bank of Canada. This, in turn, supports the short-term positive outlook for the USD/CAD pair, bolstering the prospects for further intraday gains.

On the U.S. dollar side, Friday's U.S. non-farm payrolls (NFP) report provided clear evidence of a significant deterioration in the labor market. According to the U.S. Bureau of Labor Statistics (BLS), the economy added 142,000 jobs in August compared to the expected 160,000, while the previous month's figure was revised down to 89,000.

According to other details of the report, the unemployment rate fell to 4.2% in August from 4.3% in July, and wage inflation, measured by the change in average hourly earnings, rose to 3.8% from the previous 3.6%.

All of this data has reduced the likelihood of a larger rate cut by the Federal Reserve (50 basis points) at the upcoming meeting scheduled for September 17-18. According to the CME Group's FedWatch tool, there is a 70% probability of a 25 basis point rate cut by the Federal Reserve later this month, with a 30% chance of a 50 basis point cut.

This has naturally led to a modest rise in U.S. Treasury yields, and along with a softer risk tone, it helped the U.S. dollar extend its Friday rebound from last week's low. Amid ongoing geopolitical tensions, concerns about an economic slowdown in the U.S. temper investor appetite and benefit the safe-haven U.S. dollar.

Today, Monday, no significant economic data will be released from either the U.S. or Canada, leaving the currency pair influenced by U.S. dollar and crude oil price dynamics.

From a technical perspective, oscillators on the daily chart are trying to recover from lower levels but have not yet confirmed a positive shift. Therefore, before positioning for further gains, it would be prudent to wait for some additional strength beyond the key 200-day simple moving average (SMA), near the round level of 1.3600. Strength beyond this level could help the pair climb to the next barrier around the 1.3620 level. The subsequent upward movement could continue toward the 1.3700 round level.

On the other hand, the 1.3550 level will protect against an immediate decline, below which the USD/CAD pair could slip back to the psychological level of 1.3500. A convincing break below this level would indicate that the recent rebound observed over the past two weeks has exhausted itself, exposing the 1.3440 level or the lowest level seen in March, which was reached last month.