The bullish outlook for the USD/CAD currency pair continues to retreated. On the one hand, this push is driven by the U.S. dollar approaching a near two-week low amid expectations for a Federal Reserve rate cut soaring. From Friday onward, the two attracted fresh sellers. In the first half of the European session, they moved towards a one week low. This pattern is likely to remain true as speculators expect big swings in the market before the release of the next Canadian employment count.
With the USD continuing under pressure, the USD/CAD cross has the opportunity to continue its downtrend towards the 1.3600 psychological mark. This is an important level because it will closely correspond to a year-to-date low just above/below the 1.3540 area that was established in June. Environmental journalists, and especially health policy analysts, have been watching these movements very closely. They don’t think bullish sentiment will last given the market is simply too tight—unless fundamentals change dramatically.
If the USD/CAD pair makes a recovery, bullish traders will be interested. They would be especially thrilled if the price action can push decisively above the key 1.3900 resistance level. We estimate that breaking through this barrier would be enough to boost additional cost-effective gains. This would likely move spot prices towards their next key resistance barrier around the 1.3950 area. More than that, taking back the psychological barrier of 1.4000 could come within reach of traders if it’s surpassed.
A couple of trading days ago, the overnight high for USD/CAD was just over the 1.3775 area. This new level would be an abrupt barrier for any upward progress. Traders are keeping a close watch on the psychological 1.3800 round number. They too are watching the 100-day simple moving average (SMA), which is presently located around the 1.3825 mark. Provided USD/CAD maintains upward momentum above this SMA, it looks poised to retest last week’s swing high. This high is the conjunctive point between the 1.3875-1.3880 area.
In case the duo exhibits weakness, watch for help to emerge round 1.3700 spherical determine. This support would surely hold under fire, especially if the price ever closes below this week’s low at approximately 1.3720. Bearish oil prices and continued trade uncertainty have made the Loonie an even rudderless currency. As market participants adapt to these challenges, they are discovering more consistent support for USD/CAD.
Falling crude oil prices continue to hover around a two-month low. This decline is worrisome as U.S. tariffs increase. They will likely damage the health of economies around the world and dampen demand for fuel. Earlier this week, President Trump indicated new tariffs on imports of semiconductors and pharmaceuticals. This decision contributes to the growing list of uncertainties weighing on the USD/CAD exchange rate.
Adding to the bullish sentiment surrounding USD/CAD is the fact that ongoing trade-related uncertainties have further weighed on the Canadian dollar (CAD). Equities are trading with a very bullish tone this morning. This reduced safe-haven demand for the U.S. dollar is weighing USD/CAD lower.
Traders will now await Canadian employment data for new direction which may impact USD/CAD dynamics. The timing of this important information can remove uncertainty and help underpin positive market sentiment and expectations. This lack of clarity has the potential to strongly influence either currency in the pair.
Beyond them, changes or developments related to Federal Reserve leadership may have a considerable impact on USD/CAD direction. Trump has supposedly already narrowed his list down to four candidates to replace current Fed Chair Jerome Powell. This decision would only create more volatility in the currency markets.