The Canadian Dollar (CAD) faced downward pressure on Friday as the US Dollar surged following better-than-expected US Nonfarm Payrolls (NFP) figures. While Canada’s Ivey Purchasing Manager’s Index (PMI) showed signs of recovery in September, it was overshadowed by the robust US payrolls data. The US NFP numbers exceeded expectations, with a substantial increase in job additions, leading to a shift in market sentiment regarding a potential rate cut by the Federal Reserve in November.
The USD/CAD pair experienced a slight decline on Friday, with the Canadian Dollar losing ground against the US Dollar. The Ivey PMI for September improved to 54.9 after a dip in the previous month, indicating positive economic activity in Canada. However, the spotlight was on the US NFP data, which showed a significant increase in net job additions, surpassing the forecasted numbers. This strong US labor market performance has diminished the likelihood of a double rate cut by the Fed in November, with traders now expecting a single 25 bps cut.
In terms of market movement, the USD/CAD pair has been trending higher, approaching key resistance levels near the 50-day and 200-day Exponential Moving Averages (EMA). Despite a period of decline in August, the pair has stabilized and bounced back from the 1.3450 level. The proximity of the EMAs suggests a significant technical resistance zone, with a potential break above leading to further upside towards the 1.3700 level. On the downside, the pair has found support around 1.3450, and a breach of this level could result in a retest of the 1.3350 region.
The release of Nonfarm Payrolls data by the US Bureau of Labor Statistics is a critical economic indicator that influences market sentiment. The monthly report reveals the number of new jobs created in non-agricultural sectors, with high readings seen as bullish for the US Dollar and vice versa. The market’s reaction to the NFP figures depends on a holistic assessment of the data, including previous months’ revisions and the Unemployment Rate. Overall, the latest NFP report has shifted expectations regarding Fed rate cuts in November, with traders now anticipating a single 25 bps reduction.
In conclusion, the Canadian Dollar faced downward pressure against the US Dollar following the release of strong US NFP figures, overshadowing positive economic data in Canada. The USD/CAD pair is approaching key resistance levels, signaling a potential breakout towards higher levels. The Nonfarm Payrolls data is a significant economic indicator that guides market sentiment and influences trading decisions. Overall, the recent market developments suggest a shift in expectations regarding Fed rate cuts, impacting the USD/CAD pair’s performance in the coming weeks.
