Mixed Employment Reports Stir Uncertainty in USD/CAD Pair
The USD/CAD exchange rate is navigating turbulent waters as forex traders assess fresh employment data from both the United States and Canada. While job creation beat expectations in both countries, broader economic signals and technical indicators are creating a wait-and-see environment ahead of the upcoming US inflation report, which is expected to influence the Federal Reserve’s next move on interest rates.
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US Economy Adds 139,000 Jobs in May, Tempers Fed Rate Cut Bets
In the United States, nonfarm payrolls grew by 139,000 jobs in May, surpassing the projected 130,000. The unemployment rate remained unchanged at 4.2%, while average hourly earnings rose—a sign that wage pressure continues to linger.
This stronger-than-expected labor market performance comes amid concerns about economic weakness due to rising tariffs under the Trump administration. Yet, the economy’s resilience has pushed back expectations of a near-term interest rate cut from the Federal Reserve. Traders are now closely eyeing this week’s US inflation data, which will likely play a decisive role in shaping monetary policy going forward.
Canada Surprises with Modest Job Gains Despite Rising Unemployment
In contrast, Canadian employment also exceeded expectations, albeit modestly. The nation added 8,800 jobs in May, defying forecasts that called for a loss of 11,900. However, the unemployment rate ticked up to 7.0%, in line with projections.
The Bank of Canada recently held interest rates steady for a second consecutive time. If labor market resilience persists, the central bank may adopt a more cautious stance in the coming months. Still, the uptick in joblessness highlights ongoing structural challenges within the Canadian economy, particularly in sectors sensitive to global trade and energy prices.
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USD/CAD Technical Forecast: Bulls Eye Breakout After Bullish Divergence
From a technical perspective, the USD/CAD pair is currently testing a crucial resistance zone near the 1.3701 level and the 30-period Simple Moving Average (SMA) on the 4-hour chart. Although the price remains under the SMA and the Relative Strength Index (RSI) is below 50, a bullish divergence has emerged, hinting at a potential upside reversal.
Earlier, the pair fell to a new low around 1.3650, but the RSI printed a higher low, suggesting weakening bearish momentum. If bulls gain traction and break above the resistance zone, the next target would be the 1.3850 level. Conversely, failure to breach this level could reinforce the prevailing downtrend and push the pair lower again.
What to Watch This Week
With no major economic releases expected from either the US or Canada today, the USD/CAD pair may consolidate as traders await direction from Wednesday’s US Consumer Price Index (CPI) data. This report will likely provide critical insight into the Fed’s future policy path—and in turn, shape the direction of the US dollar against its Canadian counterpart.
Bottom Line: The USD/CAD exchange rate is caught between competing narratives—resilient labor markets on one hand and uncertainty over future interest rate moves on the other. As the pair hovers near technical resistance, all eyes now turn to inflation data for the next big move.