The dollar is strengthening on Monday against major currencies. The USDCAD currency pair price is approaching the one-month high set at the previous session. This is happening against the background of the US labor market indicators release.
The data released on Friday showed an accelerated growth in the number of jobs in the US in August. At the same time, the unemployment rate jumped to 3.8% and wage growth slowed. These indicators suggest that conditions for easing monetary policy this month are in place.
The full impact of the US Federal Reserve's interest rate hikes has still not been completely transmitted to the real economy, a former vice chairman of the central bank said on Friday.
According to the CME FedWatch tool, traders estimate a 93% chance of the central bank keeping rates unchanged at its September meeting.
The latest economic data show a moderate decline in US inflation. The figures indicate a slowdown in the US economy, but it is not precipitous. This data reinforces market participants' belief that there could be a gradual slowdown without a sharp downturn.
Investors' attention this week will be focused on a number of speeches of Fed representatives. It may hint at the future path of monetary policy at its next meeting on Sept. 19–20.
In addition, the Bank of Canada will announce an interest rate decision this week. According to most Reuters economists, the Canadian regulator is expected to leave its key interest rate at 5.00% at its Sept. 6 meeting and maintain that level until at least the end of March 2024. This could lower the value of the Canadian dollar.
The USDCAD currency pair is forming a narrow correction on the H4 timeframe.
In terms of wave analysis, the price is forming the second descending wave on the M30 timeframe. Strong news background of the middle of the week may cause a change of trend and the transition of the second wave into the third ascending wave.
The short-term outlook for the USDCAD is to buy.
The target is at the level of 1.3670.
Part of the profit should be fixed near the level of 1.3610.
A Stop-loss should be placed near the level of 1.3555.
The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.