USD/CAD Breakout Builds: Can Bulls Smash 1.4140 as Fed Cut Hype Grows?
USD/CAD stayed soft around 1.4100 during the European session, marking a second day of muted movement. The pair slipped earlier...
Quick overview
- USD/CAD remains stable around 1.4100, influenced by expectations of a Federal Reserve rate cut in December.
- Market sentiment shifted significantly, with a 69% chance now priced in for a 25-bp rate cut, following comments from Fed officials.
- The Canadian Dollar struggles to gain traction due to declining oil prices and a 0.7% drop in retail sales for September.
- Technical indicators suggest a bullish continuation for USD/CAD as long as it holds above 1.4080, with potential targets at 1.4140 and 1.4176.
USD/CAD stayed soft around 1.4100 during the European session, marking a second day of muted movement. The pair slipped earlier as expectations for a Federal Reserve rate cut in December gained traction, dragging the US dollar lower across major currencies.
According to the CME FedWatch Tool, markets now price a 69% chance of a 25-bp rate cut next month — up sharply from 44% a week ago. The shift came after New York Fed President John Williams noted policymakers could adjust rates in the “near term,” a comment that reinforced bets on early easing.
Fed Governor Stephen Miran added fuel to the outlook, stating he would support a 25-bp cut given recent labor market data. While Boston Fed President Susan Collins offered a more cautious view, the overall tone still pulled the dollar off its recent highs.
Oil Weakness Limits Canadian Dollar Upside
Despite dollar softness, the Canadian Dollar couldn’t fully capitalize as WTI crude extended its decline for the fourth straight session, trading near $57.90.
The downside pressure came as US diplomatic negotiations on the Russia–Ukraine front hinted at progress, raising concerns of increased global supply into an already saturated market. Since Canada is the largest oil supplier to the US, lower crude prices often weigh directly on CAD sentiment.
Adding to the drag, Canadian retail sales fell 0.7% in September, reversing a 1% gain in August. Most of the decline came from auto dealerships, where new car sales dropped 3.6%, signaling softer domestic demand.
USD/CAD Technical Outlook: Buyers Defend 1.4080
USD/CAD continues to stabilize after breaking out of a large symmetrical triangle that has shaped the market since late October. The decisive push above 1.4080, and the consolidation above the 20-EMA, signals the pair is attempting to transition from sideways chop into a more directional uptrend.
A clean ABCD bullish structure has formed, with the rally from 1.3970 (C-leg) delivering a strong impulse toward current levels. Former resistance at 1.4080 has now turned into support. Repeated long-wick rejections show buyers are protecting this zone aggressively.
Key technical highlights:
- Price holds above both the 20-EMA and 200-EMA
- The RSI at 65 shows momentum without overbought risk
- No bearish divergence detected
- A potential 20/200 EMA bullish crossover is developing
- Candles show doji/spinning tops — a sign of consolidation before continuation
A break above 1.4140 would expose 1.4176, followed by 1.4214.
USD/CAD Trade Opportunity
Bullish Continuation (Preferred Scenario)
As long as USD/CAD holds above 1.4080, the trend favors buyers.
- Entry: 1.4100–1.4110
- Stop-Loss: 1.4070
- Target 1: 1.4140
- Target 2: 1.4176
This setup aligns with the breakout structure, bullish ABCD pattern, and strengthening EMA profile.
Bearish Countertrend (Higher Risk)
A sharp rejection at 1.4140 via a shooting star, bearish engulfing, or triple-wick reversal may trigger a temporary pullback.
- Entry: Below 1.4110 after bearish rejection
- Target: 1.4080
- Stop-Loss: 1.4155
This remains short-term only, as the broader trend still leans bullish.
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