USD/CAD Slips Below 1.4100, But Downside Pressure Remains Limited

Fundamental Overview

USD/CAD edged lower during Friday’s European session, slipping below 1.4100 after touching a near two-week high on Thursday. Despite the pullback, bearish pressure is limited, and the pair remains on track for strong weekly gains supported by a firm US Dollar.

The US Dollar Index recently climbed to its strongest level since late May as markets scaled back expectations of further Federal Reserve rate cuts. Sentiment improved after delayed NFP data showed 119K new jobs added, beating forecasts, even though unemployment rose to 4.4%. This reinforced confidence in overall labor market resilience.

Dollar momentum has paused slightly ahead of the weekend amid concerns over slowing US activity linked to the ongoing government shutdown. Meanwhile, the Canadian Dollar continues to face pressure from soft inflation data and persistent weakness in Oil prices—typically a key support factor for the Loonie. These dynamics are helping prevent any substantial downside in USD/CAD.

Looking ahead, traders will focus on Canadian Retail Sales, US flash PMIs, and comments from Fed officials. Oil price movements will also play a major role in shaping near-term volatility. Overall, USD/CAD remains close to multi-month highs and retains a bullish bias.

USD/CAD Technical Analysis – Daily Chart

Technical Overview

• USD/CAD is trading within an up channel.
• The pair is moving above all SMAs, indicating strong bullish structure.
• RSI remains in the bullish zone, while Stochastic signals a neutral trend.
• Immediate Resistance: 1.4126
• Immediate Support: 1.4041

How to Trade USD/CAD

USD/CAD recently rebounded sharply after stabilizing near key support levels. The breakout above a major resistance zone was followed by a successful retest, with price bouncing off a notable Fibonacci support. The pair is now meeting upside rejection and may correct lower toward the support area. If this zone holds, the bullish trend could resume.

Trade Suggestion:
Limit Buy: 1.4059
Take Profit: 1.4126
Stop Loss: 1.4026

Frequently Asked Questions (FAQ)

Q1: Why did USD/CAD pull back below 1.4100?
The move is mainly due to profit-taking after a strong rally, though downside remains limited.

Q2: What is supporting the US Dollar?
Markets have reduced expectations of further Fed rate cuts, and strong NFP data boosted USD sentiment.

Q3: Why is the Canadian Dollar under pressure?
Soft domestic inflation data and weakening Oil prices are weighing on the Loonie.

Q4: What levels should traders watch?
Immediate resistance is at 1.4126, with support at 1.4041.

Q5: What could move USD/CAD next?
Canadian Retail Sales, US PMIs, Fed speeches, and Oil price movements will be key drivers.

Disclaimer

This report is for informational purposes only and does not constitute financial or investment advice. Market conditions can change quickly. Traders should perform their own analysis or seek guidance from a licensed financial professional before making trading decisions.