Will USD/CAD Stay Strong Amid Oil Gains and Fed Cuts?
USD/CAD remains stable near 1.3950, supported by a resilient U.S. Dollar and steady crude oil prices
FUNDAMENTAL OVERVIEW:
USD/CAD trades steady near 1.3950 during Wednesday’s session, consolidating after reaching a five-month peak of 1.3986 last Thursday. The U.S. Dollar (USD) remains firm, with the DXY up 0.3% on the day, bolstered by weakness in the Euro (EUR) and Japanese Yen (JPY).
However, the Greenback’s upside appears limited as investors increasingly price in Federal Reserve (Fed) rate cuts. The CME FedWatch Tool shows a nearly 95% probability of a 25-basis-point cut in October and over an 80% chance of another in December. Market participants now await the FOMC Minutes and several Fed officials’ speeches later today for further policy guidance.
Meanwhile, political uncertainty in Washington continues as the U.S. government shutdown extends beyond a week, with the Senate set to vote again on funding bills Wednesday. The prolonged deadlock could dampen economic confidence and influence the Fed’s outlook.
On the Canadian front, higher crude prices offer some support to the Loonie. WTI crude extends gains for a fourth straight day, rising 0.3%, after OPEC+ approved a smaller-than-expected output increase of 137,000 barrels per day for November.
Additionally, bilateral talks between Canada and the U.S. showed a constructive tone, though no concrete progress on trade or tariffs was announced. Overall, USD/CAD remains range-bound, supported by a firm U.S. Dollar but capped by rebounding Oil prices.
USD/CAD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview:
USD/CAD is trading within an up channel.
USD/CAD is moving above all the Moving Averages (SMA).
The Relative Strength Index (RSI) is in Buying Zone, while the Stochastic oscillator suggests Neutral trend.
Immediate Resistance level: 1.4020
Immediate support level: 1.3864
HOW TO TRADE USD/CAD
After a sharp drop, USD/CAD found solid support and staged a strong rebound, breaking above a key resistance level with firm bullish momentum. The pair is currently facing rejection from the upside and may pull back to retest its support zone. If this zone holds and the pair remains above it, USD/CAD could resume its upward trajectory.
