The USD/CAD pair is trading close to 1.3650 during the Asian session on Wednesday. Attention is on the US Nonfarm Payrolls (NFP) data for June. The ADP Employment Change data for June, coming out at 12:15 GMT, is also important for predicting the Federal Reserve’s monetary policy. According to the CME FedWatch tool, there’s a strong chance the Fed will cut interest rates in September after keeping them steady this month. Ongoing US trade deadlines and recent tax changes are making many traders cautious, which is affecting market movements. Tensions between the US and Canada have reduced, which could support the Canadian Dollar. Trade discussions with Canada may restart soon since the digital service tax on US tech companies has been withdrawn.

USD/CAD Technical Analysis

The USD/CAD pair is facing resistance when it rises above the 20-day EMA, indicating a “Sell on Rise” pattern. The RSI is around 40.00. If the RSI drops below 40.00, bearish momentum could increase. If USD/CAD breaks below 1.3540, it may drop to 1.3500 or even 1.3420. If it exceeds 1.3820, the pair could climb to 1.3920 and beyond. The USD plays a significant role in the global market, and Federal Reserve policies heavily influence its value. This summary is for informational purposes only and should not be considered financial advice. Traders should approach the market carefully, understanding the associated risks. Currently, the USD/CAD pair is in a consolidation phase. Price movements have slowed down, and traders are waiting for clearer signals before making new trades. Staying around 1.3650, the pair remains in a tight range during overnight trading in Asia. With the June ADP Employment Change data set to be released later, immediate directional movements may be limited until clearer information is available.

Market Outlook and Expectations

The focus is also shifting towards Friday’s US Nonfarm Payrolls data. The outcome will influence expectations for the Federal Reserve’s policy decisions. Current interest rate futures pricing, especially from the CME FedWatch tool, suggests a growing likelihood of a rate cut as soon as September. Confidence in any changes in July is low, but September shows stronger potential than a few weeks ago. Meanwhile, market participants are considering other recent developments. The rollback of a controversial tax on American tech companies has eased tensions between the US and Canada, which may provide slight support for the Canadian Dollar, especially if broader trade negotiations resume. This change could indicate a more cooperative approach. From a technical standpoint, the USD/CAD outlook shows that upward moves are encountering resistance near the 20-day EMA. This suggests sellers become more active every time the pair attempts to rise, creating a “Sell on Rise” pattern. The Relative Strength Index remains around 40. For those monitoring momentum, a sustained move below 40 would indicate increased selling pressure, potentially leading to more active short positions and further declines. A key support level to watch is 1.3540. If the price drops below that level with momentum, it may quickly fall to 1.3500 or 1.3420, especially if employment data is weaker than expected or if market sentiment shifts. Conversely, if the economic data exceeds expectations or uncertainty around a rate cut grows, breaking above 1.3820 could lead to a stronger rise towards 1.3920 or higher. In this environment, where policy expectations are heavily influenced by upcoming data, market sentiment can change quickly. Since the US Dollar is crucial for global trade and capital flow, even small changes in Fed expectations can impact the USD/CAD and other markets. Given this, it’s prudent to stay reactive rather than trying to predict movements. In times like these, responding to confirmed levels and waiting for strong data is more effective than guessing broader economic trends. For now, the range remains narrow, volatility is low, and the focus is on job reports and their impact on the next Federal Reserve meeting. Create your live VT Markets account and start trading now.

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