USD\/CAD held a narrow range for more than a week and traded around 1.4210 in Thursday\u2019s European session, staying close to 1.4200 as markets waited for fresh direction on the US rate outlook. Attention is on June US Nonfarm Payrolls at 12:30 GMT, with forecasts pointing to 110K new jobs versus 172K in May. The Unemployment Rate is seen unchanged at 4.3%, while Average Hourly Earnings are expected at 3.5% year-on-year, up from 3.4%, alongside a 0.3% monthly rise.<\/p>\n
Federal Reserve chair Kevin Warsh said at the ECB Forum in Sintra that inflation remains \u201ctoo high\u201d and reiterated the aim of price stability. Oil has weakened following progress in indirect US-Iran talks in Doha on Wednesday, a move that reduces support for Canada as a net oil exporter. <\/p>\n
Technically, the pair remains above the 20-day EMA at 1.4103, while the RSI sits at 77.7, indicating overbought conditions. Support is seen near 1.4103, and resistance remains within a 1.4169\u20131.4248 consolidation band; a break higher could expose the 1 April 2025 high at 1.4415.<\/p>\n—\n
We see the USD\/CAD pair is consolidating around the 1.4200 mark, which suggests the market is waiting for a major catalyst before making its next move. The upcoming US Nonfarm Payrolls (NFP) report is the event everyone is watching. This data will be critical for shaping the Federal Reserve’s interest rate path.<\/p>\n
The market is forecasting a slowdown to 110K jobs, but our focus is on the expected rise in wage growth to 3.5% year-over-year. Persistently high wage growth could force the Fed to maintain its hawkish stance, as it directly fuels inflation. Core PCE, the Fed’s preferred inflation gauge, has remained stubbornly above target near 2.8%, making any signs of wage pressure highly sensitive.<\/p>\n
Historically, NFP releases often surprise the market, as seen in the May 2024 report which added 272,000 jobs, far exceeding the 185,000 expected. We anticipate a significant price swing following the release this week. This environment is ideal for traders using options like straddles to play the expected volatility, regardless of the ultimate direction.<\/p>\n
Beyond this one report, the key driver is the growing policy divergence between the US and Canada. The Bank of Canada began cutting interest rates in June 2024, while Fed officials continue to warn that inflation is “too high.” This fundamental difference supports a stronger US dollar against the Canadian dollar over the medium term.<\/p>\n
Adding to the pressure on the loonie, crude oil prices have softened, with WTI trading below $80 a barrel amid geopolitical talks. As Canada is a major oil exporter, lower energy prices are a direct headwind for its currency. This provides another reason for our bullish outlook on the USD\/CAD pair.<\/p>\n—\n
From a technical standpoint, we would view any pullback towards the 20-day moving average near 1.4103 as a buying opportunity. A clean break above the current consolidation could open the door for a move toward the 1.4415 level. Using call options with a strike price above 1.4250 could be a capital-efficient way to position for this potential upside.<\/p>\n
However, the Relative Strength Index (RSI) is in overbought territory above 77, signaling that the recent rally might be overextended. This suggests we should avoid chasing the pair at its current highs. We believe a more prudent strategy is to wait for a price dip to establish long positions.<\/p>\n\n\n\n