Canadian Dollar Forecast: USD/CAD Reverses Ahead of August Low

Canadian Dollar Outlook: USD/CAD

USD/CAD reverses ahead of the August low (1.3722) to stage a four-day rally, and the exchange rate may establish a new trend should it break out of last month’s range.

Canadian Dollar Forecast: USD/CAD Reverses Ahead of August Low

USD/CAD appears to be on track to test the August high (1.3925) as it climbs to a fresh weekly high (1.3846), but the employment reports coming out of the US and Canada may sway the exchange rate as both regions are expected to announce a rise in job growth.

US/Canada Economic Calendar

In turn, USD/CAD may face increased volatility ahead of the weekend as the US is anticipated to add 75K jobs in August, and a positive development may encourage the Federal Reserve to further combat inflation as ‘a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment.’

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At the same time, a rebound in Canada Employment may keep the Bank of Canada (BoC) on the sidelines as the ‘Governing Council is proceeding carefully,’ but another unexpected contraction in job growth may drag on the Canadian Dollar as it puts pressure on Governor Tiff Macklem and Co. to pursue lower interest rates.

With that said, USD/CAD may establish a new trend as it retraces the decline from the August high (1.3925), but the exchange rate may consolidate over the coming days if it gives back the advance from the weekly low (1.3733).

USD/CAD Price Chart – Daily

Chart Prepared by David Song, Senior Strategist; USD/CAD Price on TradingView

• USD/CAD continues to hold above the August low (1.3722) as it extends the advance from earlier this week, and a push above 1.3850 (50% Fibonacci extension) may lead to a test of the August high (1.3925).
• Need a move/close above the 1.3940 (61.8% Fibonacci retracement) to 1.4000 (61.8% Fibonacci extension) zone to open up the May high (1.4017), with the next area of interest coming in around 1.4110 (50% Fibonacci retracement).
• However, lack of momentum to hold above 1.3780 (23.6% Fibonacci extension) may push USD/CAD toward the August low (1.3722), with a move/close below the 1.3700 (38.2% Fibonacci extension) to 1.3710 (78.6% Fibonacci retracement) region bringing 1.3630 (38.2% Fibonacci extension) on the radar.

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong