- The Canadian dollar (CAD) depreciated after better-than-expected NFP data from the US.
- Canada saw an escalate in Ivey PMIs, but market watchers missed it.
- A significant escalate in the number of up-to-date NFP jobs in the US dashed hopes for interest rate cuts at the end of the trading week.
The Canadian dollar (CAD) fell further on Friday as broad market expansion of recent U.S. dollar auctions pushed the U.S. dollar higher across the board after U.S. nonfarm payrolls (NFP) data significantly topped expectations.
Canada’s Ivey Purchasing Manager’s Index (PMI) rebounded in September, but the Canadian data was rejected by investors fully focused on US employment data. Net up-to-date NFP jobs in the U.S. in September were much higher than expected, with upward revisions to employment data in several months. The rapid change in the outlook for the US labor market resulted in a significant change in the interest rate market’s attitude towards the Federal Reserve’s (Fed) interest rate cut in November.
Daily summary of entities operating on the market
- The Canadian dollar lost just one-fifth of one percent against the U.S. dollar on Friday.
- Canada’s Ivey PMI for September recovered, returning to 54.9 after falling to 50.3 a month earlier.
- U.S. NFP employment figures were well above expectations, adding 254,000 in September. net up-to-date job positions compared to the forecast 140 thousand The August NFP print was also revised upwards to 159,000.
- The US unemployment rate also fell to 4.1% from the previous 4.2%, further dashing market hopes for another double Fed rate cut in November.
- According to CME’s FedWatch Tool, interest rate traders currently see an overwhelming 95% chance of a single Fed rate cut on November 7, with a particularly fearful 5% expecting no move.
- Hopes for a second rate cut of 50 bp in November have completely evaporated.
Canadian Dollar Price Forecast
Over the last few sessions, the USD/CAD pair has been gaining ground, reaching a critical point near the 50-day (1.3584) and 200-day (1.3602) exponential moving average (EMA). After a sustained downtrend from mid-August to early September, the pair showed signs of stabilization, rebounding from the 1.3450 level.
This latest price action signals that USD/CAD may be testing the upper limits of its consolidation range, with potential resistance near 1.3600. Although the pair remains below the 50-day and 200-day EMAs, the proximity of these moving averages suggests a zone of significant technical resistance. A break above these levels could open the way for further gains towards the 1.3700 level.
On the other hand, the pair appears to have found support around 1.3450, a key level that has been a recent low. Failure to stay above this level could lead to renewed selling pressure, potentially pushing the pair back to the 1.3350 area.
USD/CAD daily chart
Economic indicator
Non-agricultural wages
The Nonfarm Payrolls publication presents the number of up-to-date jobs created in the U.S. during the previous month across all nonfarm businesses; is published by US Bureau of Labor Statistics (BLS). Monthly payroll changes can be extremely volatile. This number is also subject to powerful reviews, which can also create volatility in the Forex market. Generally, a high reading is seen as bullish for the US dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the unemployment rate are as critical as the headline data. The market reaction therefore depends on how the market evaluates all the data contained in the BLS report.
