USD/CAD plummets to the 1.3520s near prior week´s lows

• USD/CAD drops into last week´s lows as CAD gets a boost from BoC chatter.
• If support holds, then the 1.3550s come into focus in a correction.

USD/CAD is falling as the market price in the Bank of Canada and Federal Reserve interest rate outlooks. At the time of writing, USD/CAD is trading in the 1.3520s after falling from a high of 1.3632. 

In recent trade, the Bank of Canada´s Tiff Macklem stated, ´´ If we see signs inflation stuck materially above 2%, we could hike again.´´ When compared to the dovish statement from the Federal Reserve on Wednesday, this gives the CAD the edge and we are seeing USD/CAD as a consequence, despite the heavy drop in the price of oil. 

Meanwhile, the attention will turn to the labour market reports from both the US and Canada. ´´US payrolls likely slowed for a third consecutive month to a still firm pace in April, though the slowest since 2020,´´ analysts at TD Securities said, adding, ´´we also look for the UE rate to rise to 3.6%, and wage growth to print 0.3% MoM.´As for  In Canada, the analysts said that they look for a 15k print, well below the 6m trend and the weakest since September 2022. This should see the UE rate edging higher to 5.1% as wage growth cools to 4.7% YoY.´´

The data will be critical for both the US and Canada with the Federal Reserve data dependant after the Federal Open Market Committee raised the target range for the fed funds rate by 25bp to 5.00-5.25%, as widely expected. However, the accompanying statement saw changes from the March statement, with the most important being the removal of the line “the Committee anticipates that some additional policy firming may be appropriate,” signaling that further rate rises will no longer be the default choice at coming meetings.

USD/CAD technical analysis

USD/CAD is testing support in the 1.3520s and last week´s lows. a break here gives way to a move into the 1.3490s for the foreseeable future. However, a correction would be anticipated imminently. 

The hourly chart shows the price heading into the support area and if this were to see a deceleration then a reasonable upside target would be the 1.3550s in a correction.