• The US NFP report showed stronger-than-expected job growth.

• Powell dashed hopes for a massive rate cut.

• The dollar gained from safe-haven demand as tensions in the Middle East escalated.

The USD/CAD weekly forecast favors more upside as the likelihood of an aggressive Fed easing cycle drops after strong NFP data.

Ups and downs of USD/CAD

The USD/CAD pair had a bullish week as the dollar rallied due to several factors. Notably, US economic data revealed a resilient economy, with the labor market showing unexpected strength. The NFP report showed stronger-than-expected job growth. Meanwhile, the unemployment rate fell, indicating tight labor market conditions.

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At the same time, Powell dashed hopes for a massive rate cut, saying the Fed would cut rates by 25-bps. Further support for the dollar came from safe-haven demand as tensions in the Middle East escalated.

Next week’s key events for USD/CAD

Market participants will watch US inflation data and the FOMC policy meeting minutes in the coming week. Meanwhile, Canada will release employment figures. 

The US consumer inflation report will cause considerable volatility as it will shape the outlook for Fed rate cuts. Economists expect the monthly figure to increase by 0.1% after a 0.2% increase in the previous month. Meanwhile, the annual figure might ease from 2.5% to 2.3%. Softer-than-expected numbers will boost bets for a massive November Fed rate cut. On the other hand, if inflation spikes, the Fed will likely stick to a gradual pace for rate cuts. Meanwhile, Canada’s employment figures will impact the Bank of Canada’s next move. 

USD/CAD weekly technical forecast: Bulls take charge but face resistance

On the technical side, the USD/CAD price has broken above the 22-SMA, indicating a shift in sentiment. Bulls took control after the price found support at the 1.3425 level. Moreover, the RSI showed a bullish divergence, indicating weakness in the previous downtrend. 

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Although bulls have taken charge, they face a solid barrier at the 1.3600 resistance level. Therefore, if the price fails to break this resistance, it might start consolidating between the 1.3425 support and the 1.3600 resistance or continue the previous downtrend. 

On the other hand, a break above the 1.3600 resistance would make a higher high, confirming a new bullish trend. Still, the price would have to stay above the SMA and make more higher highs and lows. Consequently, it might revisit and break above the 1.3725 resistance level.

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