USD/CAD Holds 1.3910 as Bulls Eye 1.4000 Despite Oil Weakness and BoC Cuts
USD/CAD traded sideways for the second day in a row in Europe, holding above 1.3910. Despite the mixed bag of bullish...
Quick overview
- USD/CAD has traded sideways above 1.3910 for two consecutive days amid mixed market factors.
- The Canadian Dollar is under pressure from weak crude oil prices and expectations of further rate cuts by the Bank of Canada.
- The US Dollar is facing its own challenges with anticipated Fed rate cuts and potential government shutdown risks.
- Technically, USD/CAD is consolidating below 1.3960, with a bullish outlook if it breaks above 1.3963.
USD/CAD traded sideways for the second day in a row in Europe, holding above 1.3910. Despite the mixed bag of bullish and bearish factors, the bigger picture suggests higher in the medium term.
The Canadian Dollar is being pressured by weak crude oil prices, with Brent and WTI near multi-month lows as traders price in an OPEC+ production boost. Since oil is Canada’s number one export, its underperformance hits the Loonie directly.
And adding to the pressure, expectations of more BoC rate cuts are gaining traction. Governor Tiff Macklem recently said policies to shield growth while managing inflation, which means the Loonie could see more downside ahead.
Dollar Deals with Fed Cuts and Shutdown Risks
On the US side, the Greenback is capped by its own issues. Markets expect the Fed to cut rates twice this year and the risk of a US government shutdown is still out there. These have kept the US Dollar Index (DXY) near weekly lows.
But traders are eyeing upcoming data releases like ADP private payrolls and ISM Manufacturing PMI. Stronger than expected could give the dollar a short term boost and allow USD/CAD to extend its move.
Key takeaways:
- Oil prices are weighing on CAD.
- BoC easing expectations support USD/CAD.
- US Fed cut bets and shutdown fears cap dollar strength.
USD/CAD Technical Outlook: Bulls Eye 1.4000
Technically, USD/CAD is consolidating just below 1.3960 after the big rally from mid-September. The pair is respecting the ascending trendline, a series of higher lows.
- 50-EMA (1.3878) has held as support.
- 100-EMA (1.3829) underpins the bullish structure.
- Resistance at 1.3963 and 1.3977 with 1.4000 as the target.
- RSI at 54 is cooling but not in bearish divergence.
If buyers can close above 1.3963, the way to 1.4000 is clear. If they break below 1.3885, sentiment will shift and 1.3840 will be exposed.
Trade: For beginners, the play is a breakout. Above 1.3963 long to 1.4000, stop 1.3880. Below 1.3885 short to 1.3840.
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