USDCAD has turned bullish in the last two weeks and despite the recent surge in crude Oil prices sending WTI above $76 today, buyers remain in control, pushing the price above 1.36 earlier today. The situation has turned bullish for the USD, particularly after the NFP employment numbers last Friday, while the Bank of Canada (BoC) has turned dovish on softer economic data and falling inflation in Canada, which has invigorated USD/CAD buyers.
Last week’s U.S. employment data confirmed a resilient labor market, reducing the likelihood of a 50 basis point rate cut from the Federal Reserve in November. Consequently, the USD/CAD pair has seen support from widening U.S.-Canada interest rate spreads, bolstering the U.S. dollar. The recent uptick has pushed USD/CAD above the 1.36 level, with the 20 SMA (gray) on the hourly chart providing a strong support base, indicating robust buying pressure. Given this momentum, it seems likely that USD/CAD could retest the September peak near 1.3650, especially as the Bank of Canada considers its own 50 basis point rate cut for October.
USD/CAD Chart H1 – The 20 SMA Acting As Support
Middle East Tensions and Oil Prices
Rising tensions in the Middle East have spurred an increase in crude oil prices. Last week, WTI crude surged nearly 10%, marking the largest weekly gain since March 2023, as concerns grew over possible Israeli retaliation against Iran’s oil infrastructure following recent missile activity. Today, WTI crude continued its climb, surpassing $76, further supported by fears of potential supply disruptions.
Chinese Stimulus and CAD Outlook
While Chinese monetary and fiscal stimulus measures could offer some relief to the Canadian dollar, the USD maintains control over the USD/CAD pair. This trend is primarily driven by the strength of the U.S. dollar and anticipation of policy shifts from both the Fed and the Bank of Canada. With the CAD still under pressure, and risk-off sentiment driven by geopolitical concerns, USD/CAD appears poised for further gains in the near term.
US WTI Crude Oil Live Chart
WTI