The USD/CAD outlook reveals a slight bearish tone as markets juxtapose Canada’s upbeat employment report with the mixed signals from the US job market. Yet, amidst this comparison, the pair finds support from softer oil prices, contributing to the weakening of the Canadian dollar.

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On Friday, both the US and Canada released employment reports. In Canada, jobs grew more than expected in February, showing a robust labor market. As a result, the Bank of Canada has more reason to delay rate cuts. Meanwhile, the US released a mixed report, showing weakness in the labor market. Employment increased, but the unemployment rate surged to 3.9% compared to expectations of 3.7%. Therefore, there is more evidence that demand in the economy is weakening, paving the way for rate cuts starting in June.

Markets expect the first BoC cut in June, just like the Fed. However, unlike the Fed, which is gaining confidence that inflation is declining, the BoC needs more convincing. Consequently, the Canadian dollar strengthened against the US dollar. This sets the stage for a downtrend in the pair. 

However, the recent decline in oil prices capped gains in Canada’s currency. Oil fell on Friday and ended last week down as investors worried about demand in China. China is the second largest consumer of oil. Therefore, poor demand in the country hurts oil prices. 

USD/CAD key events today

There won’t be any major reports from the US or Canada today. Consequently, investors will keep digesting Friday’s employment reports.

USD/CAD technical outlook: Price retests channel support after breakout

USD/CAD 4-hour chart

On the charts, USD/CAD has pulled back to retest its recently broken channel support. This move came after the price had made new lows below the 1.3450 key support level. To fully confirm the channel breakout, the price must make a lower low after retesting the channel support as resistance. 

Therefore, if the channel support line holds firm, the price will bounce lower for a lower low. Moreover, bears will get a chance to target the 1.3375 support level. However, if the price goes back into the bullish channel and above the 30-SMA, it will confirm a false breakout. Consequently, the price would rise to retest the 1.3600 resistance level.

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