USD/CAD Outlook: Markets Brace for Aggressive BoC Fee Minimize…

• Canada’s financial system expanded by 1% within the third quarter.

• Markets raised the probabilities of one other super-sized BoC price reduce from 31% to 50%. 

• Market individuals are awaiting the US nonfarm payrolls report.

The USD/CAD outlook exhibits a weak Canadian greenback after information final week raised the probability of one other huge Financial institution of Canada price reduce in December. In the meantime, the greenback was regular as market individuals appeared ahead to key information and Fed policymaker remarks.

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Knowledge on Friday revealed that Canada’s financial system expanded by 1% within the third quarter, beating the Financial institution of Canada’s estimate for a 1.5% enhance. On the identical time, the determine was an enormous decline from the second quarter when the financial system expanded by 2.2%.

After the information, markets raised the probabilities of one other super-sized price reduce in December from 31% to 50%.  Rates of interest in Canada have fallen quicker than wherever else as a result of the financial system is extraordinarily delicate to excessive charges. Consequently, financial progress has slowed down sharply as a consequence of excessive borrowing prices.

At the identical time, the financial system is dealing with the specter of a 25% tariff on items exported to the US. If there isn’t any negotiation between the 2 international locations, Canada’s financial system will undergo. On the identical time, the Financial institution of Canada might be beneath extra strain to spur progress with decrease borrowing prices.  Then again, the US financial system has remained pretty resilient within the face of excessive charges.

In the meantime, inflation has paused close to the Fed’s 2% goal. Though merchants count on a price reduce in December, they count on a gradual tempo in 2025. Trump’s administration will probably increase financial demand and reheat the financial system.  Elsewhere, market individuals are awaiting the US nonfarm payrolls report due on Friday for extra clues on the December Fed assembly. Presently bets present a 65% likelihood of a price reduce.

USD/CAD key occasions right now

USD/CAD technical outlook: Bullish engulfing candle

On the technical facet, the USD/CAD value has paused on the 30-SMA resistance after making a robust reversal sign. The worth made a bullish engulfing sample after reaching its bullish trendline. Though USD/CAD has been chopping via the 30-SMA, it has made larger highs and lows, signaling a bullish pattern. 

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Consequently, there’s a excessive likelihood this pattern will proceed with a break above the 30-SMA. Bulls will intention to problem the 1.4150 resistance stage. The pattern will solely change if the worth breaks beneath the trendline.

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