USD/CAD stabilizes above 1.3640 ahead of US ADP employment data
2025-07-02 17:39:18
The U.S. dollar maintained a mildly positive trend against the Canadian dollar during the European trading session on Wednesday (July 2), thanks to strong U.S. job openings and manufacturing data released on Tuesday. All eyes in the market are now focused on the U.S. ADP employment report to be released later today.
USD/CAD rebounded from a two-week low just below 1.3600 and stabilized above 1.3640 during the European trading session on Wednesday, driven by US data and cautious comments from Powell at the ECB forum in Portugal, thanks to mild risk appetite in the market.
U.S. data on Tuesday showed a bigger-than-expected increase in job openings in May, while manufacturing activity improved more than expected with production expanding for the first time in four months and price inflation accelerating.
While macroeconomic data this week supported the dollar, lower oil prices, Canada’s main export, continued to weigh on the Canadian dollar. The U.S. benchmark West Texas Intermediate (WTI) crude oil price remained around $65 as geopolitical tensions eased and traders expected further supply increases from this week’s OPEC+ meeting.
The focus today is the US ADP employment change report, which is expected to continue the trend of Tuesday's JOLTS data, showing a significant increase in employment in June. If the report is positive again, it will increase investors' expectations for Friday's non-farm payrolls report, which may further push up the dollar.
The Canadian dollar has maintained its long-term uptrend in recent months, partly due to reduced trade war risks. However, if a trade agreement is not reached soon, the resumption of trade hostilities could weaken the Canadian dollar again, which in turn could trigger a new round of buying pressure on USD/CAD.
Currently, there is a significant interest rate differential between the Federal Reserve and the Bank of Canada. The Fed has kept interest rates at 4.5%, while the Bank of Canada has kept its policy rate at 2.75%. Both institutions have adopted a neutral stance and intend to observe inflation trends before making further adjustments. Although the main driver of USD/CAD in recent months has not been the interest rate differential (but rather the overall weakness of the US dollar), the interest rate differential remains a potential factor. Higher US interest rates still make dollar-denominated assets more attractive, especially US Treasuries. If these assets regain favor in global markets, it could be a turning point, boosting demand for the US dollar, putting pressure on the Canadian dollar, and ultimately supporting USD/CAD.
USD/CAD Technical Outlook
(Source of USD/CAD daily chart: Yihuitong)
Ongoing Downward Channel: USD/CAD has been trading in a well-defined bearish channel since early March. The recent bullish pullback has not been enough to break this structure, making the channel still the dominant pattern in the short term. However, it is worth noting that prices have failed to make new lows, which, if sustained, could signal a shift to a sideways phase in the market.
TRIX indicator: The TRIX indicator is still below the zero axis, but is sloping upwards and approaching the neutral zone, which shows that the downward momentum is weakening. If this trend continues, a more neutral outlook may be ushered in in the next few trading days.
MACD indicator: MACD histogram is still close to the zero axis, indicating neutral momentum in the short term. As long as this state persists, the pair may remain range-bound, waiting for clearer catalysts.
Key levels to watch:
1.35435 Key Support: This is the lowest level observed in recent weeks. A break below this level could confirm a stronger bearish bias and lead to a more sustained downtrend.
Resistance around 1.37807: This is a key technical area that coincides with the 23.6% Fibonacci retracement level, the 50-period simple moving average, and the Ichimoku cloud. A clear break above this level could invalidate the current bearish channel and trigger a short-term bullish turn.
1.39332 Major Resistance: This is a relatively far away level, corresponding to the 38.2% Fibonacci retracement level. If the price reaches this area, it may signal a potential trend reversal for USD/CAD and buying pressure may start to take over.
At 17:37 Beijing time, USD/CAD was at 1.3652/54, up 0.06%.
USD/CAD rebounded from a two-week low just below 1.3600 and stabilized above 1.3640 during the European trading session on Wednesday, driven by US data and cautious comments from Powell at the ECB forum in Portugal, thanks to mild risk appetite in the market.
U.S. data on Tuesday showed a bigger-than-expected increase in job openings in May, while manufacturing activity improved more than expected with production expanding for the first time in four months and price inflation accelerating.
While macroeconomic data this week supported the dollar, lower oil prices, Canada’s main export, continued to weigh on the Canadian dollar. The U.S. benchmark West Texas Intermediate (WTI) crude oil price remained around $65 as geopolitical tensions eased and traders expected further supply increases from this week’s OPEC+ meeting.
The focus today is the US ADP employment change report, which is expected to continue the trend of Tuesday's JOLTS data, showing a significant increase in employment in June. If the report is positive again, it will increase investors' expectations for Friday's non-farm payrolls report, which may further push up the dollar.
The Canadian dollar has maintained its long-term uptrend in recent months, partly due to reduced trade war risks. However, if a trade agreement is not reached soon, the resumption of trade hostilities could weaken the Canadian dollar again, which in turn could trigger a new round of buying pressure on USD/CAD.
Currently, there is a significant interest rate differential between the Federal Reserve and the Bank of Canada. The Fed has kept interest rates at 4.5%, while the Bank of Canada has kept its policy rate at 2.75%. Both institutions have adopted a neutral stance and intend to observe inflation trends before making further adjustments. Although the main driver of USD/CAD in recent months has not been the interest rate differential (but rather the overall weakness of the US dollar), the interest rate differential remains a potential factor. Higher US interest rates still make dollar-denominated assets more attractive, especially US Treasuries. If these assets regain favor in global markets, it could be a turning point, boosting demand for the US dollar, putting pressure on the Canadian dollar, and ultimately supporting USD/CAD.
USD/CAD Technical Outlook
(Source of USD/CAD daily chart: Yihuitong)
Ongoing Downward Channel: USD/CAD has been trading in a well-defined bearish channel since early March. The recent bullish pullback has not been enough to break this structure, making the channel still the dominant pattern in the short term. However, it is worth noting that prices have failed to make new lows, which, if sustained, could signal a shift to a sideways phase in the market.
TRIX indicator: The TRIX indicator is still below the zero axis, but is sloping upwards and approaching the neutral zone, which shows that the downward momentum is weakening. If this trend continues, a more neutral outlook may be ushered in in the next few trading days.
MACD indicator: MACD histogram is still close to the zero axis, indicating neutral momentum in the short term. As long as this state persists, the pair may remain range-bound, waiting for clearer catalysts.
Key levels to watch:
1.35435 Key Support: This is the lowest level observed in recent weeks. A break below this level could confirm a stronger bearish bias and lead to a more sustained downtrend.
Resistance around 1.37807: This is a key technical area that coincides with the 23.6% Fibonacci retracement level, the 50-period simple moving average, and the Ichimoku cloud. A clear break above this level could invalidate the current bearish channel and trigger a short-term bullish turn.
1.39332 Major Resistance: This is a relatively far away level, corresponding to the 38.2% Fibonacci retracement level. If the price reaches this area, it may signal a potential trend reversal for USD/CAD and buying pressure may start to take over.
At 17:37 Beijing time, USD/CAD was at 1.3652/54, up 0.06%.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
