The USD/CAD currency pair is exhibiting strength, hovering near a two-week high amid modest support from the US dollar. This bullish trend is being buoyed by increasing crude oil prices, which are providing some stability to the Canadian dollar. As traders assess their next moves, they are keenly awaiting significant economic indicators due to be released this week.
On Monday, the USD/CAD pair marked its fourth consecutive day of attracting buyers, trading just below the key 1.3600 level. This momentum is largely driven by a robust US dollar, which has reached heights not seen in seven weeks, fueled by expectations of a more gradual approach to policy easing by the Federal Reserve. Recent comments from Fed officials have been perceived as somewhat hawkish, compelling market participants to reconsider previously held expectations for a substantial interest rate reduction at the upcoming November Federal Open Market Committee meeting.
The latest employment figures paint a positive picture, revealing that the US economy added 254,000 jobs in September, significantly surpassing predictions. Coupled with a drop in the unemployment rate to 4.1% from 4.2%, these indicators suggest a resilient job market. Additionally, upward revisions to job growth in previous months and a higher-than-expected increase in average hourly earnings have stoked inflation concerns, suggesting that the Fed may not need to implement aggressive rate cuts.
Contrastingly, the Canadian dollar faces challenges, with the market pricing in the potential for a 50 basis point interest rate cut by the Bank of Canada in response to signs of economic slowing. This outlook undermines CAD strength. Furthermore, ongoing geopolitical tensions in the Middle East are contributing to elevated crude oil prices, which, while they could provide support to the Canadian dollar, are also influencing the dynamics of the currency pair.
This week, key financial reports set to be released include the Federal Reserve’s September meeting minutes and US consumer inflation data. Additionally, the Producer Price Index will offer insights into potential shifts in the Fed’s policy stance. On the Canadian side, employment statistics will be available, which may further impact USD/CAD movements.
From a technical standpoint, gains in the USD/CAD will depend on maintaining levels above the 200-day Simple Moving Average around 1.3600. If the pair can break through resistance in the 1.3615-1.3620 range, it could challenge the swing high of 1.3645-1.3650. Conversely, a decline below the 1.3540 level may expose further downside toward 1.3475, with potential to revisit multi-month lows around 1.3420 and 1.3400.
