Loonie Struggles as USD/CAD Holds Near Multi-Week Highs

Key Moments

Fundamental Drivers Favor USD Strength

The USD/CAD pair is steady near 1.4235 during the Asian session on Thursday, holding close to highs achieved over roughly the last four weeks. The broader backdrop remains supportive for further gains, with the balance of factors continuing to lean toward U.S. Dollar strength against the Canadian Dollar.

The Canadian Dollar (CAD) remains soft, weighed down by what is described as a predominantly dovish policy stance from the Bank of Canada (BoC) and by trade tensions between the United States and Canada. The recent decline in crude oil prices is adding further pressure on the commodity-linked currency. Together with a firm U.S. Dollar (USD), these elements are providing a constructive environment for USD/CAD and reinforce the near-term bullish outlook for the pair.

U.S. Yields, Fed Expectations, and Geopolitics Support the Greenback

Market reaction to U.S. Personal Consumption Expenditures (PCE) data released on Wednesday reduced expectations for an October interest rate increase by the Federal Reserve. However, concerns about inflation tied to oil prices are keeping U.S. bond yields elevated near multi-year highs. Investors are still assigning a higher probability that the Federal Reserve will raise rates before the end of the year, a scenario that continues to underpin the Greenback.

Geopolitics remain another pillar of USD support. The ongoing standoff between the United States and Iran is sustaining a risk premium that benefits the U.S. Dollar. In the context of the broader Middle East situation, the article notes that U.S. President Donald Trump had rejected a seven-day ceasefire proposal from Iran. It also reports that U.S. officials believe Trump could authorize a return to major combat operations after the November midterm elections. These developments help keep geopolitical risk elevated, reinforcing demand for the USD and backing expectations for further upside in USD/CAD.

Upcoming Data and Events on Traders’ Radar

Investors are now turning their attention to the upcoming U.S. economic releases, including the regular Weekly Initial Jobless Claims figures and the ISM Manufacturing PMI. In addition, speeches from several influential Federal Open Market Committee (FOMC) members, combined with fresh geopolitical headlines, are expected to guide the near-term direction of the U.S. Dollar.

Oil price movements will also be closely watched, given their influence on the Canadian Dollar and, by extension, USD/CAD. These factors come ahead of the release of the U.S. Nonfarm Payrolls (NFP) report on Friday, which is likely to be another important catalyst for the pair.

USD/CAD Technical Picture

The technical backdrop for USD/CAD continues to point to a bullish near-term bias, although momentum indicators suggest that the move is becoming stretched. The 14-period Relative Strength Index (RSI) is holding in overbought territory near 78, signaling that the pair may be vulnerable to a pause or a corrective pullback rather than an immediate continuation of sharp gains at current levels.

Despite these overbought conditions, the broader technical structure still favors buying on dips. Any corrective weakness is viewed as likely to attract demand near the psychological 1.4200 level, followed by the 1.4170-1.4165 support zone. A decisive break below that area could open the door toward the 1.4100 handle.