USDCAD has broken sharply lower following Canada's surprise jobs blowout on Friday, with the pair now pricing in a divergence: the Bank of Canada is expected to hold rates Wednesday, while the Fed is expected to cut.
Canada added 54,000 jobs in November, and the unemployment rate plunged to 6.5%, taking a BOC cut off the table. Meanwhile, the Fed is 90% priced to cut by 25bps on Wednesday, narrowing the rate differential and weakening the US dollar against the loonie.
Key drivers
Technical: USDCAD corrected to 50% Fibonacci (1.4140–60) of the 1.4790–1.3543 impulse leg and is now breaking down in a potential head and shoulders pattern with neckline at 1.3543.
Downside targets: 1.3370–1.3396 (61.8% extension + 50% retracement confluence), 1.3068 (61.8% retracement), and 1.2895 (100% extension full measured move).
Risk scenario: Neckline hold above 1.3543 could see bounce back toward 1.36 or 1.43, but below 1.4140, the path of least resistance is lower.
Are you trading the USDCAD breakdown? Share your head and shoulders setups in the comments and follow for more central bank divergence and technical trade ideas.
This content is not directed to residents of the EU or UK. Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Canada added 54,000 jobs in November, and the unemployment rate plunged to 6.5%, taking a BOC cut off the table. Meanwhile, the Fed is 90% priced to cut by 25bps on Wednesday, narrowing the rate differential and weakening the US dollar against the loonie.
Key drivers
- Canada jobs report beat expectations with +54k positions (vs expected loss), unemployment fell to 6.5% from 6.9% — three straight months of gains totalling 181k jobs.
- BOC decision this week virtually certain to hold at 2.25% after cutting in October and signalling the easing cycle is likely over.
- Fed FOMC decision on Wednesday priced in at 90% odds for a 25bps cut to 3.75–4%, the third consecutive cut driven by cooling US labour and dovish Fed commentary.
Technical: USDCAD corrected to 50% Fibonacci (1.4140–60) of the 1.4790–1.3543 impulse leg and is now breaking down in a potential head and shoulders pattern with neckline at 1.3543.
Downside targets: 1.3370–1.3396 (61.8% extension + 50% retracement confluence), 1.3068 (61.8% retracement), and 1.2895 (100% extension full measured move).
Risk scenario: Neckline hold above 1.3543 could see bounce back toward 1.36 or 1.43, but below 1.4140, the path of least resistance is lower.
Are you trading the USDCAD breakdown? Share your head and shoulders setups in the comments and follow for more central bank divergence and technical trade ideas.
This content is not directed to residents of the EU or UK. Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.