- Canada’s manufacturing PMI rose from 51.1 to 52.0 in November.
- The US manufacturing PMI rose to 48.4 after a previous reading of 46.5.
- US unemployment might increase in November.
The USD/CAD outlook shows stronger-than-expected business activity in Canada’s manufacturing sector which is supporting the loonie. Meanwhile, the dollar eased slightly as market participants awaited more clues on future Fed policy moves.
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Data on Monday revealed that Canada’s manufacturing PMI rose from 51.1 to 52.0 in November, the third consecutive month of expansion. At the same time, it was the fastest growth in nearly two years. The Bank of Canada has lowered rates aggressively to boost growth, and the effects are clear in the economy.
Nevertheless, market participants expect the central bank to continue at this pace until more sectors of the economy recover. Policymakers might vote for another massive rate cut in December.
On the other hand, the dollar also rebounded on Monday after an upbeat US manufacturing report. Notably, the manufacturing PMI rose to 48.4 after a previous reading of 46.5. The figures briefly boosted the dollar before caution returned ahead of key employment data and policymaker remarks.
The dollar ended last week frail as markets priced a 66% chance of a Fed rate cut in December. This week, more data will continue shaping this outlook. The nonfarm payrolls report might show an increase in the unemployment rate from 4.1% to 4.2%, supporting the outlook for a rate cut.
Meanwhile, economists expect a faster job growth, with the economy adding 195,000 jobs in November. A miss would solidify rate-cut bets. On the other hand, an unexpected jump would increase the likelihood of a pause. At the same time, traders will watch Fed Chair Jerome Powell’s speech, which might contain further policy clues.
USD/CAD key events today
USD/CAD technical outlook: Bears fight for control at the 30-SMA
On the technical side, the USD/CAD price is dropping toward the bullish trendline, which acts as a strong support level. Initially, bulls showed strength and pushed the price above the 30-SMA. However, they failed to sustain a move to the 1.4150 resistance level.
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As a result, the price broke back below the SMA, and the RSI dipped below 50. However, bears must break below the trendline and the 1.3951 support level to confirm a new downtrend. Otherwise, the price will bounce again, aiming for the 1.4150 resistance.
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