USD/CAD Price Forecast: 20-day EMA act as key barrier ahead of Canadian employment data

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USD/CAD Price Forecast: 20-day EMA act as key barrier ahead of Canadian employment data

USD/CAD is under pressure as improved dovish Fed speculation has weighed on the US Dollar.
Weak US job data has prompted dovish Fed expectations.
Investors await the Canadian labor market data for January.

The USD/CAD pair trades 0.17% lower to near 1.3690 during the European trading hours on Friday. The Loonie pair is under pressure as the US Dollar’s (USD) rally hits pause, following an improvement in market expectations for the Federal Reserve (Fed) reducing interest rates in the March policy meeting.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currency peers, is 0.1% down to near 97.85.

Dovish Fed prospects have revived as the latest batch of United States (US) employment-related data showed signs of continued weakness in the job market.

Meanwhile, the Canadian Dollar (CAD) trades higher ahead of the labor market data for January, which will be published at 13:30 GMT. Statistics Canada is expected to show that the economy created 7K fresh jobs, fewer than 8.2K in December. The Unemployment Rate is seen remaining unchanged at 6.8%.

Investors will pay close attention to the Canadian employment data to get fresh cues on the Bank of Canada’s (BoC) monetary policy outlook.

USD/CAD technical analysis

USD/CAD trades lower at around 1.3690 as of writing. The pair sits beneath the 20-day EMA at 1.3707, and the average edges lower, reinforcing a mild bearish bias. Price action remains capped by this dynamic barrier, keeping rebounds contained.

The 14-day Relative Strength Index (RSI) at 46 (neutral) signals subdued momentum, with buyers yet to reclaim control.

The descending 20-day EMA continues to guide the trend, and a daily close above 1.3707 would improve tone and open a corrective path. Failure to clear the average would preserve downside pressure and keep rallies shallow. RSI below 50 limits upside; a push through that midline would strengthen bullish attempts and shift risk toward recovery.

(The technical analysis of this story was written with the help of an AI tool.)

Economic Indicator

Net Change in Employment

The Net Change in Employment released by Statistics Canada is a measure of the change in the number of people in employment in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending and indicates economic growth. Therefore, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

Why it matters to traders?

Canada’s labor market statistics tend to have a significant impact on the Canadian dollar, with the Employment Change figure carrying most of the weight. There is a significant correlation between the amount of people working and consumption, which impacts inflation and the Bank of Canada’s rate decisions, in turn moving the C$. Actual figures beating consensus tend to be CAD bullish, with currency markets usually reacting steadily and consistently in response to the publication.