US jobs boom and domestic employment decline deal Canadian Dollar a double blow

• 0.78% higher on Friday, USD/CAD trades near 1.4120 after divergent employment reports.
• 165K jobs were added in the United States in October, well above the 65K forecast.
• 6.7% was Canada's unemployment rate after an unexpected loss of 4.7K jobs.

USD/CAD is up 0.78% on Friday. The pair is extending its rally to around 1.4120 at the time of writing, as better-than-forecast United States (US) employment data lift the US Dollar (USD). Weak Canadian labour figures are meanwhile weighing on the Canadian Dollar (CAD). Released simultaneously, the reports reveal a marked divergence in the two countries' labour markets, adding to the pair's bullish momentum.

October Nonfarm Payrolls (NFP) rose by 165K against a market forecast of 65K, the US Bureau of Labor Statistics (BLS) said on Friday. Upward revisions lifted September's total from 29K to 60K and August's from 133K to 186K. Together, the revisions added 84K jobs to earlier estimates, underscoring the resilience of the US labour market. Unemployment also fell, with the US rate easing from 4.2% in September to 4.1% in October.

With employment exceeding forecasts, expectations are supported that the Federal Reserve (Fed) could keep monetary policy restrictive or consider additional interest rate increases if the economy remains resilient. Markets now assign a nearly 80% probability to a 25-basis-point rate rise in December, according to the CME FedWatch tool, compared with around 70% a day earlier. The repricing is lending further support to the US Dollar. At the time of press, the US Dollar Index (DXY) is up 0.74% on Friday at around 102.35.

In contrast, the Canadian labour market is showing considerably greater weakness. An expected gain of 13.6K jobs in October instead became an unexpected loss of 4.7K, Statistics Canada reported. That decline was smaller than September's substantial 68.3K loss. However, unemployment rose from 6.5% to 6.7%, against forecasts that the rate would remain unchanged.

Over the past three months, Canada's cumulative job losses have reached 114.7K. The figures underline sustained labour market weakness as uncertainty over US trade tariffs and their effects on hiring persists.

For the Bank of Canada (BoC), the weak data make the outlook more complicated. On 28 October, the central bank raised its benchmark interest rate for the first time in more than three years. Further deterioration in employment could prompt policymakers to proceed more cautiously with additional monetary tightening, especially if economic activity stays under pressure.

The employment divergence is therefore widening the gap between expectations for Fed and BoC monetary policy, giving USD/CAD further support. Resilient US labour conditions alongside softer Canadian employment could keep the US Dollar favoured over its Canadian counterpart.

USD/CAD: Technical Outlook

On the four-hour chart, the 200-period simple moving average (SMA) at 1.4120 provides immediate overhead resistance, with USD/CAD trading just below it at 1.4119. Horizontal resistance at 1.4130 and 1.4150 adds to the dense barrier above the pair. This keeps the near-term outlook cautious despite the strong rise from 100-period SMA (EMA) support at 1.4035. Having climbed into overbought territory near 77, the Relative Strength Index (14) suggests that upward momentum may be overstretched. A corrective pullback remains a risk while the price stays below the 200-period SMA.

A move higher would first encounter the 200-period SMA at 1.4120, ahead of horizontal resistance at 1.4130 and 1.4150. The next, more distant barrier stands at 1.4200. Below the market, the recent price area around 1.4119 is the first zone to monitor. Firmer support lies at the horizontal level near 1.4070, followed by the 100-period SMA at 1.4035, where buyers stepped in previously. A retreat towards this support cluster would indicate fading momentum in the current rally.

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