Key Moments
- USD/CAD trades around 1.4110 after two sessions of gains, with support from firm Fed rate-hike expectations.
- Odds of a 25-basis-point Fed hike at the December FOMC meeting have risen above 78% after stronger-than-expected US jobs data.
- Falling crude oil prices continue to weigh on the commodity-linked Canadian Dollar, adding support to USD/CAD.
Macro Drivers for USD/CAD
USD/CAD is trading near 1.4110 during Asian hours on Monday, retreating slightly after two consecutive days of gains. The pullback appears limited as renewed strength in the US Dollar (USD) could reemerge, helped by rising expectations for an additional Federal Reserve rate increase in December following robust US labor market data.
Market participants are now focused on upcoming US Consumer Price Index (CPI) figures due Tuesday and the Producer Price Index (PPI) release on Friday for further clarity on the Federal Reserve’s policy trajectory.
Data from the CME FedWatch tool shows that the implied probability of a 25-basis-point rate hike at the December Federal Open Market Committee (FOMC) meeting has climbed above 78%. Strong US employment figures are underpinning the Greenback. Nonfarm Payrolls (NFP) rose by 165,000 in October, surpassing the market consensus of 65,000 and building on September’s revised reading of 60,000. The Unemployment Rate edged down to 4.1%, better than expectations of 4.2%.
Oil Weakness Undermines the Canadian Dollar
On the Canadian side, the commodity-linked Canadian Dollar (CAD) remains under pressure as crude oil prices decline. The weakness in energy markets is helping to support USD/CAD on dips.
Crude prices fell after US President Donald Trump said that further military strikes on Iran are “highly unlikely,” contingent on ongoing progress on Iran’s nuclear program and the continued openness of the Strait of Hormuz. Trump also commented that the unpopular Middle East conflict, which had pushed energy prices higher, contributed to Republicans’ recent midterm election setbacks.
In a phone interview with CNN cited by Reuters, Trump reiterated that additional military action would probably not be required if Iran signs a firm agreement. Despite earlier indications that major attacks could resume after the midterms, no large-scale US military actions have taken place. At the same time, Iran has cautioned that it will respond to any future strikes by targeting US and Israeli assets.
USD/CAD Technical Setup
On the daily chart, USD/CAD is quoted at 1.4110, trading above both the 50-day and nine-day Exponential Moving Averages (EMAs). This alignment points to a constructive short-term tone as the pair extends its rebound from recent lows.
The 14-day Relative Strength Index (RSI) stands at 55.3, having eased back from earlier overbought readings but still residing in a neutral-to-positive band. This configuration suggests that bullish momentum remains in place without appearing excessively stretched.
| Indicator | Level / Value | Implication |
|---|---|---|
| Spot price (daily) | 1.4110 | Trading above key moving averages |
| 50-day EMA | 1.4054 | Initial support area |
| Nine-day EMA | 1.4047 | Secondary support, close to 50-day EMA |
| 14-day RSI | 55.3 | Neutral-to-positive momentum |
On the downside, first support is seen at the 50-day EMA at 1.4054, followed closely by the nine-day EMA at 1.4047. This tight cluster forms an important demand zone that underpins the short-term uptrend while it holds. With no explicit resistance levels provided, traders are likely to watch psychological marks and recent swing highs above 1.4111 for signs of buying fatigue. A daily close back below the EMA cluster would weaken the constructive bias and could signal a deeper corrective phase.
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