• Canada’s Prime Minister Justin Trudeau might resign as early as Monday.

• The US will release figures showing the state of the labor market this week.

• Market participants will watch Fed speakers.

The USD/CAD outlook shows optimism about Canada’s political landscape as markets anticipate the current Prime Minister’s resignation. Meanwhile, the greenback pulled back as markets awaited crucial economic data from the US to guide the likely Fed policy path further this year.

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Political uncertainty has plagued Canadian markets since last year. The most recent development was the increasing likelihood that the current Prime Minister would lose his seat at the next election. This created uncertainty about the future, hurting the loonie. 

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However, recent reports have shown that Prime Minister Justin Trudeau might resign early Monday. Such an outcome would clear some of the fog regarding the future, strengthening the Canadian dollar. Nevertheless, the uncertainty will remain until after an election. 

Meanwhile, the US dollar eased slightly as traders paused at the start of a week packed with key US economic reports. To start the year, the US will release figures showing the state of the labor market. These include job vacancies, private employment, unemployment claims, and nonfarm payrolls.

Upbeat figures will support the outlook for gradual Fed easing this year, boosting the dollar. On the other hand, downbeat numbers will increase rate-cut expectations. At the same time, market participants will watch Fed speakers who might emphasize the need for caution this year.

USD/CAD key events today

Neither Canada nor the US will release any major reports today. Therefore, traders will focus on political developments in Canada.

USD/CAD technical outlook: Bears Eye a Range Breakout

On the technical side, the USD/CAD price is consolidating between the 1.4351 support and the 1.4450 resistance levels. The sideways move follows a period when the price consistently made higher highs and lows. At the same time, it respected the 30-SMA as support, while the RSI traded above 50 in bullish territory. 

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However, bulls were unable to breach the 1.4450 resistance despite several attempts. The price trades below the 30-SMA within the range, showing bears are in the lead. At the same time, the RSI trades below 50 after making a bearish divergence. This indicates fading bullish momentum within the range. 

Therefore, bears are likely to challenge and break below the range support. Such an outcome would allow USD/CAD to reach the 1.4200 psychological support level.

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