The USD/CAD currency pair made a notable intraday reversal on Tuesday as the US dollar, initially weakening, surged back above the crucial 1.35 support level following stronger-than-expected JOLTS job openings data. This sudden shift in market sentiment highlights the persistent tug-of-war between fundamental economic data and monetary policy expectations. 

For forex traders, the USD/CAD pair continues to serve as a critical gauge of North American economic divergence, rate speculation, and geopolitical tension. The Servelius team of brokers breaks down this complex issue in a comprehensive and accessible way.

JOLTS Data Sparks a Dollar Rebound

The Job Openings and Labor Turnover Survey (JOLTS) revealed that US employers still have a robust demand for labor, with job openings exceeding expectations. This “hot” reading reaffirmed the resilience of the US labor market, challenging recent assumptions that the economy may be cooling enough to warrant an imminent interest rate cut by the Federal Reserve.

From a forex perspective, this unexpected labor strength led to a re-pricing of risk across multiple asset classes, most notably in the US dollar (USD). The Canadian dollar (CAD), which had been gaining ground earlier in the session, gave up its gains quickly as traders began to unwind bearish USD positions, particularly those betting on a rapid easing cycle from the Fed.

Interest Rate Cut Expectations: Still a Moving Target

Despite earlier projections showing a 90% probability of a September Fed rate cut, according to Fed Funds Futures, the latest JOLTS figures injected a degree of uncertainty. The Federal Reserve remains in a data-dependent posture, and strong labor market numbers like this could delay any easing measures. 

While markets continue to lean dovishly, the Fed’s monetary policy trajectory remains fluid.

The idea that the Fed has potentially “waited too long” to cut rates is still in circulation. However, the persistent strength in employment data undermines the urgency for dovish policy shifts. A tight labor market suggests inflationary pressures could linger, potentially justifying a more hawkish tone from policymakers.

This evolving rate outlook adds considerable volatility to USD/CAD pricing, especially in light of Canada’s central bank, the Bank of Canada (BoC), having already moved towards easing. The widening divergence in interest rate differentials could become a renewed source of support for the greenback.

Technical Analysis: The 1.35 Support Level Holds Steady

From a technical standpoint, the 1.3500 level has proven to be a formidable support zone on longer-term charts, including weekly and monthly timeframes. This area has historically acted as a pivot, either reinforcing bullish trends or signaling consolidation zones.

The recent bounce off this level is consistent with previous price behavior, where buyers emerge at key structural support. Moreover, the dollar has been oversold against multiple G10 currencies, including the CAD. This strengthens the case for a technical rebound from these oversold levels.

Should the pair maintain its position above 1.35, the next resistance targets would likely be around 1.3600 and 1.3660, both of which align with short-term Fibonacci retracements and previous swing highs. On the downside, a break below 1.35 could open the door toward 1.3400, but current momentum suggests this is less likely in the immediate term.

Macro Headwinds: US-Canada Trade Tensions Still Loom

Beyond monetary policy and technical factors, the ongoing trade dispute between the United States and Canada adds a layer of geopolitical complexity to the USD/CAD pair. Although the White House has hinted that a deal may be signed soon, progress has been slow, and protectionist rhetoric continues to fuel uncertainty.

Such tensions can act as a double-edged sword. On one hand, they may weaken the Canadian dollar due to its trade-dependent economy, particularly in commodities and manufacturing. On the other hand, prolonged negotiations can introduce risk-off sentiment, which often benefits the US dollar due to its safe-haven appeal.

Until a concrete resolution is reached, traders should expect a fair amount of headline-driven volatility, especially during major news releases or diplomatic statements.

Conclusion: Expect a Choppy Path Forward

The bounce in USD/CAD following the hot JOLTS data reinforces how sensitive the forex market remains to macroeconomic releases, particularly those tied to the Federal Reserve’s policy outlook. With 1.35 acting as a significant support level and US employment data staying robust, the US dollar’s short-term trajectory appears constructive.

However, traders should remain vigilant. The September rate cut narrative could be reshaped by upcoming data such as Non-Farm Payrolls, CPI, and Fed commentary. Meanwhile, Canada’s domestic data and any updates on the US-Canada trade front will also play a role in shaping sentiment.