CFD Trading Rate US Dollar vs Canadian Dollar (USDCAD)

• USD/CAD slumps to 1.3800 even though the US Dollar exhibits strength.
• Investors see the BoC choosing the June meeting as their earliest point for pivoting to rate cuts.
• Oil prices weaken as Fed Powell’s hawkish guidance raises doubts over global economic outlook.

The USD/CAD pair dipped to round-level support of 1.3800 in Wednesday’s early American session. The Loonie asset faces pressure despite multiple tailwinds, such as higher Bank of Canada (BoC) rate cut hopes, a sharp decline in the Oil price, and hawkish guidance from Federal Reserve (Fed) Chair Jerome Powell.

The S&P 500 opens on a positive note, suggesting an improvement in the risk appetite of the market participants. 10-year US Treasury yields edge down to 4.64% but are still close to a five-month high as Fed Powell supported the argument of keeping interest rates higher for a longer period.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, turns sideways above 106.00.

Traders are pricing in a rate cut by the BoC in the June meeting as inflation remains on course towards the required rate of 2%. The BoC’s preferred inflation measure, the Core Consumer Price Index (CPI), which excludes eight volatile items, softened to 2.0% from the prior reading of 2.1%.

Last week, BoC Governor Tiff Macklem acknowledged that a rate cut in June is possible if inflation continues to decelerate sustainably after keeping interest rates unchanged at 5%.

Meanwhile, West Texas Intermediate (WTI), futures on NYMEX, have dropped to $84.00 as the dismal global economic outlook outweighs tight supply fears. Higher prospects for the Fed maintaining the monetary policy framework for a longer period weigh on the Oil price. Investors fear the global oil supply remaining tight amid deepening Middle East tensions.

• USD/CAD pulls back from the high level of 1.3846, which has not been seen since mid-November.
• The US Dollar may strengthen further on the likelihood of the Fed extending its tight monetary policy.
• The lower WTI price could limit the advance of the Canadian Dollar.

USD/CAD retreats from a five-month high of 1.3846 reached on Tuesday. The pair trades around 1.3800 during the European hours on Wednesday. The minor decline in the US Dollar (USD) adds to the downward pressure on the USD/CAD pair.

However, the US Dollar Index (DXY) remains close to its five-month peak of 106.51 achieved on Tuesday. At the time of writing, the 2-year and 10-year yields on US Treasury bonds stand at 4.94% and 4.63%, respectively.

The hawkish remarks from the Federal Reserve Chair Jerome Powell, could have supported the US Dollar (USD). According to Reuters, Powell remarked that recent data suggests minimal advancement in inflation this year, implying a prolonged period before reaching the 2% target.

The lower crude Oil prices weaken the Canadian Dollar (CAD), given that Canada is the largest oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price dips to nearly $84.40 per barrel, at the time of writing.

The concerns over Oil supply stemming from heightened tensions in the Middle East have been overshadowed by worries about global demand. Sluggish economic growth in China and the anticipated rise in US commercial stockpiles have heightened concerns regarding the global demand for crude Oil

The Canadian inflation data has provided support for the Bank of Canada (BoC) to contemplate easing borrowing conditions in its upcoming June meeting. Particularly, the closely monitored core inflation indicator exhibited signs of sustained moderation, which may influence the BoC's decision-making regarding monetary policy adjustments.

Consumer Price Index (CPI) rose by 0.6% MoM, lower than the expected 0.7% in March but higher than the previous increase of 0.3%. Meanwhile, Core CPI (YoY) increased by 2.0% at a slower pace compared to the previous rise of 2.1%.

• USD/CAD retreats from a five-month high of 1.3846 reached on Tuesday.
• The decline in crude Oil prices might have contributed to undermining the Canadian Dollar.
• Fed Chair Powell highlighted that recent data indicates the timeframe for achieving the 2% inflation target will be longer than initially anticipated.

USD/CAD snaps its five-day winning streak, trading around 1.3820 during the Asian session on Wednesday. The mild correction in the US Dollar (USD) contributes to downward pressure on the USD/CAD pair. However, the weaker crude Oil prices could put pressure on the Canadian Dollar (CAD), consequently, limiting the losses of the pair.

The latest Canadian inflation figures provided support for the Bank of Canada (BoC) to consider easing borrowing conditions in its June meeting, as the closely monitored core inflation showed signs of sustained easing.

Consumer Price Index (CPI) increased by 0.6% month-over-month, slightly below the expected 0.7% in March but higher than the previous increase of 0.3%. CPI (YoY) rose by 2.9% against 2.8% prior. Meanwhile, Core CPI (YoY) rose by 2.0% at a slower pace compared to the previous 2.1% rise. The monthly Core index showed an increase of 0.5%, higher than the previous 0.1%.

On the other side, hawkish remarks from Federal Reserve (Fed) officials and the influx of safe-haven flows could bolster the US Dollar (USD) and potentially limit the downside of the USD/CAD pair. The US Dollar Index (DXY) pulls back from a five-month high of 106.51 reached on Tuesday. This decline could be attributed to a slight decline in US Treasury yields.

Federal Reserve (Fed) Chairman Jerome Powell remarked on Tuesday that the US economy has exhibited notable strength. However, Powell also noted that recent data suggests insufficient progress on inflation this year, and achieving the confidence that inflation will reach the 2% target will take "longer than expected." This hawkish stance by Powell might have lent some support to the US Dollar.

• USD/CAD rises to 1.3820 as mixed Canadian inflation report keeps BoC rate cut hopes firm.
• BoC’s preferred inflation gauge softens to 2.0% on a year-on-year basis.
• The US Dollar hovers near a six-month high as the Fed is expected to delay rate cut plans.

The USD/CAD pair jumps to 1.3820 in Tuesday’s early New York session after Statistics Canada reported a mixed Consumer Price Index (CPI) report for March. The agency showed that monthly headline CPI grew by 0.6%, slower from expectations of 0.7% but higher than the prior reading of 0.3%. However, the annual headline inflation data accelerated to 2.9% from the prior reading of 2.8%.

The monthly Bank of Canada (BoC) CPI core data, which excludes eight volatile items, rose sharply by 0.5% compared to a meagre 0.1% growth in February. However, the annual core CPI slowed to 2% from the prior reading of 2.1%.

The return of the BoC’s most preferred inflation measure to a desired rate of 2% is expected to allow the Bank of Canada (BoC) to start reducing interest rates, which are currently expected from the June policy meeting.

Last week, BoC Governor Tiff Macklem said a rate cut in June is possible if inflation continues to decelerate sustainably after the BoC keeps interest rates unchanged at 5%. The BoC has kept interest rates steady at 5% since July 2023 to maintain downward pressure on consumer price inflation.

Meanwhile, significant demand for safe-haven assets due to worsening geopolitical tensions and faded speculation for Federal Reserve (Fed) rate cuts for the June and July policy meetings have built pressure on the Canadian Dollar.

The US Dollar Index (DXY) falls slightly from a five-month high of 106.44. The near-term demand for the US Dollar remains intact as investors see the Fed keeping interest rates higher for a longer period. Inflation remaining higher than expectations for three months in a row suggests that there should be no urgency for rate cuts.

• USD/CAD attracts some buyers for the third straight day and climbs to a fresh YTD peak.
• Reduced Fed rate cut bets, along with geopolitical risks, benefit the USD and lend support.
• An uptick in Oil prices underpins the Loonie and keeps a lid on further gains for the major.

The USD/CAD pair builds on last week's breakout momentum through the 1.3600-1.3610 supply zone and gains some positive traction for the fifth successive day on Tuesday. Spot prices climb to the 1.3815 region, or the highest level since November 14 during the Asian session and remain well supported by the underlying strong bullish sentiment surrounding the US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs to over a five-month top in the wake of expectations that the Federal Reserve (Fed) will delay cutting interest rates amid sticky inflation. Adding to this, the upbeat US Retail Sales figures released on Monday indicated that strong consumer spending could underpin inflation and force the Fed to keep interest rates higher for longer. The hawkish outlook, meanwhile, remains supportive of elevated US Treasury bond yields,  which is seen acting as a tailwind for the buck.

Apart from this, a generally weaker tone around the equity markets, amid persistent geopolitical tensions, turns out to be another factor benefitting the safe-haven Greenback and lending support to the USD/CAD pair. Meanwhile, Israel's military chief said that his country would respond to Iran's weekend missile and drone attack, raising the risk of a further escalation of conflicts in the Middle East. This assists Crude Oil prices to build on the overnight bounce from a two-week low, which could underpin the commodity-linked Loonie and cap the major.

Market participants now look to the release of the Canadian consumer inflation figures, due later during the early North American session. Meanwhile, the US economic docket features the release of housing market data and Industrial Production figures. Apart from this, speeches by influential FOMC, including Fed Chair Jerome Powell, and the broader risk sentiment will drive the USD demand. This, along with Oil price dynamics, should provide some meaningful impetus to the USD/CAD pair and allow traders to grab short-term opportunities.

• USD/CAD falls modestly to 1.3730 after refreshing a five-month high near 1.3800.
• The US Dollar consolidates near 106.00 as the focus shifts to US Retail Sales data.
• Canada’s inflation data will influence speculation for BoC rate cuts.

The USD/CAD pair drops to 1.3730 in Monday’s European session. The Loonie asset falls while the US Dollar consolidates in a tight range, indicating some strength in the Canadian Dollar. The US Dollar Index (DXY) trades sideways in a range near a six-month high around 106.00.

The near-term demand for the Loonie asset remains strong as the Federal Reserve (Fed) is expected to keep interest rates restrictive for a longer period. Fed policymakers see no urgency for rate cuts as the consumer price inflation is persistently higher.

Meanwhile, investors await the United States Retail Sales data for March, which will impact speculation for Fed rate cuts. The monthly Retail Sales are estimated to have grown at a slower pace of 0.3% against the prior reading of 0.6%. An upbeat Retail Sales data will strengthen the inflation outlook that could negatively influence market expectations to Fed rate cuts, which are currently anticipated in the September meeting.

Going forward, the Canadian Dollar will dance to the tunes of Consumer Price Index (CPI) data for March, which will be published on Tuesday. The inflation data will provide cues about when the Bank of Canada (BoC) could begin reducing interest rates.

USD/CAD delivers a stalwart rally after a breakout of the Ascending Triangle chart pattern formed on a daily timeframe. An ascending triangle formation demonstrates a sharp volatility contraction that exhibits small ticks and low volume. While a breakout in the same results in wider ticks towards the upside and heavy buying volume.

Upward-sloping 20-day Exponential Moving Average (EMA) near 1.3610 indicates more upside ahead.

The 14-period Relative Strength Index (RSI) shifts into the bullish range of 60.00-80.00, signalling a bullish momentum has been triggered.

The Loonie asset would observe a fresh upside if it breaks above April 12 high at 1.3787. This will drive the asset towards November 4 high at 1.3844, followed by November high at 1.3900.

On the contrary, a downside move below April 9 low at 1.3547 would expose the asset to the psychological support of 1.3500. A breakdown below the latter would extend downside towards February 22 low at 1.3441.

USD/CAD daily chart

• USD/CAD retreats from the YTD peak, albeit the downside remains cushioned.
• Reduced Fed rate cut bets continue to act as a tailwind for the USD and the pair.
• Softer Crude Oil prices could undermine the Loonie and help limit the downside.

The USD/CAD pair comes under some selling pressure on the first day of a new week and erodes a part of Friday's strong move up to the 1.3785 region, or its highest level since November 14. Spot prices currently trade around the 1.3760-1.3755 zone, though any meaningful corrective decline still seems elusive in the wake of the underlying strong bullish sentiment surrounding the US Dollar (USD). 

Investors pushed back their expectations for the first interest rate cut by the Federal Reserve (Fed) to September from June after data released from the US last week pointed to a still-sticky inflation. Moreover, market participants are now pricing in less than two rate cuts in 2024 as compared to three projected by the Fed. This remains supportive of elevated US Treasury bond yields, which allows the USD Index (DXY) to stand tall near the YTD peak and should act as a tailwind for the USD/CAD pair. 

Meanwhile, Crude Oil prices struggle to lure buyers despite Iran's attack on Israel over the weekend, which raised the risk of a broader region conflict and could affect Oil supply from the Middle East. This, in turn, could undermine the commodity-linked Loonie and contribute to limiting the downside for the USD/CAD pair. Hence, any subsequent fall might still be seen as a buying opportunity and remain limited, warranting caution before confirming that spot prices have formed a near-term top. 

Market participants now look to the US economic docket, featuring the release of monthly Retail Sales and the Empire State Manufacturing Index later during the early North American session. Apart from this, Fedspeak and the broader risk sentiment will drive the USD demand. This, along with Oil price dynamics, should produce short-term trading opportunities around the USD/CAD pair.

• USD/CAD jumps to 1.3735 as the Canadian Dollar weakens on dismal market sentiment.
• Investors turn risk-averse as trades priced out Fed rate cut hopes for June.
• BoC Macklen sees expectations for the Fed pivoting to rate cuts in June as reasonable.

The USD/CAD pair is advancing towards 1.3750 in Friday’s London session. The Loonie asset extends its winning spell for the third trading session as investors see the Federal Reserve (Fed) pivoting to rate cuts by the third quarter of this year.

Speculation about the Fed delivering rate cuts has waned as consumer price inflation in the United States turned sticky in March. Also, the core Producer Price Index (PPI) data, which shows an increase or decrease in the prices of goods and services, excluding food and energy prices, by owners at factory gates, remains hotter than expected. The annual core PPI grew by 2.4% from estimates of 2.3% and the prior reading of 2.0%.

For now, investors anticipate that the Fed could begin reducing interest rates after the September meeting. Also, investors expect that there will be two rate cuts instead of three, as projected by Fed policymakers in the latest dot plot.

Faded expectations for the Fed lowering interest rates from the June meeting have dented appeal for risk-sensitive assets. S&P 500 futures have posted some losses in the European session. The US Dollar Index (DXY) extends its upside to 105.85. The scenario of the Fed keeping interest rates higher for a longer period bodes well for the US Dollar.

On the Loonie front, the Canadian dollar has weakened due to firm market expectations that the Bank of Canada (BoC) will start lowering borrowing rates in June. After maintaining the status quo on Wednesday, BoC Governor Tiff Macklem said a rate cut in June is possible.

Going forward, expectations of more upside in global oil prices due to escalating geopolitical tensions could support the Canadian Dollar. Fears of Iran’s confrontation with Israel heightened after air strikes on the Iranian embassy in Damascus by the Israeli forces. Also, Israel is preparing to invade Rafae where displaced Palestinians have sheltered.

It is worth noting that Canada is the leading oil exporter to the United States, and higher oil prices support the Canadian Dollar.

• USD/CAD lacks firm intraday direction and consolidates below the YTD top set on Thursday.
• An uptick in Oil prices underpins the Loonie and caps the upside amid subdued USD demand.
• Reduced Fed rate cut bets favors USD bulls and support prospects for further near-term gains.

The USD/CAD pair oscillates in a narrow trading band during the Asian session on Friday and for now, seems to have stalled the previous day's late pullback from its highest level since November 22. Spot prices currently trade just below the 1.3700 mark, nearly unchanged for the day, though this week's breakout through the 1.3600-1.3610 supply zone favors bulls and supports prospects for a further near-term appreciating move. 

Crude Oil prices edge higher amid heightened tensions in the Middle East on the back of a possible Iranian retaliation over a suspected Israeli strike on its embassy in Syria. This, in turn, is seen underpinning the commodity-linked Loonie, which, along with subdued US Dollar (USD) price action, acts as a headwind for the USD/CAD pair. That said, jitters about growing non-OPEC output, led by the US, might cap gains for the black liquid. Apart from this, expectations that the Federal Reserve (Fed) may delay cutting interest rates favor the USD bulls and should limit the downside for the currency pair. 

The hotter-than-expected US consumer inflation figures released on Wednesday forced investors to push back their expectations about the timing of the first interest rate cut by the Fed to September from June. Investors also pared their bets for the number of rate cuts of 25 basis points (bps) this year to fewer than two, or roughly 42 bps, from about three or four a few weeks ago. This remains supportive of elevated US Treasury bond yields and assists the USD to stand tall near its highest level since November touched on Thursday, validating the near-term positive outlook for the USD/CAD pair. 

Even from a technical perspective, the post-US CPI strength above the 1.3600-1.3610 barrier and the subsequent move up suggests that the path of least resistance for spot prices is to the upside. Market participants now look to the release of the Preliminary Michigan Consumer Sentiment Index, due later during the North American session. Apart from this, speeches by FOMC members will drive the USD demand. This, along with Oil price dynamics, should produce short-term trading opportunities around the USD/CAD pair, which seems poised to register gains for the second straight week.

• USD/CAD hovers around 1.3650 in Thursday’s Asian session. 
• The BoC held rates at 5% for the sixth consecutive meeting on Wednesday. 
• US inflation in March was hotter than expected, and the Fed might delay rate cuts this year. 

The USD/CAD pair consolidates its gains above 1.3650 during the Asian trading hours on Thursday. The uptick of the pair is backed by US inflation that came in stronger than expected in March, which boosted the Greenback to a yearly high of 105.30. Investors will take more cues from the US Producer Price Index (PPI), due later on Thursday. The headline and Core PPI figures are estimated to show an increase of 2.2% YoY and 2.3% YoY, respectively. 

On Thursday, the Bank of Canada (BoC) held its key interest rate at 5% for the sixth consecutive time since July at its April meeting. The BoC governor Tiff Macklem said during the press conference following the announcement that the recent progress in inflation is encouraging, but he needs to see more evidence to make sure that inflation is sustained before moving on rate cuts. Macklem further stated that an interest rate cut in June is possible.

On the other hand, high inflation in the US grew stronger than expected in March, convincing the Federal Reserve (Fed) to keep its benchmark rates higher for longer. The Labor Department’s Bureau of Labor Statistics reported on Wednesday that the US Consumer Price Index (CPI) gained 0.4% MoM in March, while the yearly CPI figure showed an increase of 3.5% YoY. Furthermore, the Core CPI, excluding volatile food and energy components, rose 0.4% MoM while climbing 3.8% from a year ago. 

Following the CPI data, the markets’ chance of a June rate cut dropped to 21%, down from 53% on Tuesday, according to the CME FedWatch tool. The US inflation report in March indicated that the path of easing inflation remains extremely bumpy, and any loosening of monetary policy is likely to be delayed. This, in turn, propels the US Dollar Index (DXY) to yearly highs and provides some support to the USD/CAD pair. 

• USD/CAD pulls back after the BoC strikes a dovish tone in its policy statement. 
• BoC sees signs of inflation easing accompanied by higher growth. 
• USD/CAD continues broadly rising within a strict ascending channel. 

USD/CAD has pulled back about two tenths of a percentage point on Wednesday, following the Bank of Canada’s (BoC) decision to leave its key overnight interest rate unchanged at 5.0%, in line with analysts’ expectations. 

The pair is trading in the 1.3660s at the time of writing, maintaining its overall bullish tone after the US Dollar rallied following the release of hotter-than-expected US Consumer Price Index data for March. 

USD/CAD is in a rising channel which is forecast to continue evolving higher in the absence of evidence to the contrary.  

USD/CAD 4-hour Chart 

Policy Announcement 

In the accompanying statement to its meeting, the BoC said that it would continue with quantitative tightening and had noticed signs of inflation easing. 

“Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. While inflation is still too high and risks remain, CPI and core inflation have eased further in recent months. 

Although core inflation has eased, the BoC said “shelter price inflation is still very elevated, driven by growth in rent and mortgage interest costs.” 

According to the statement, the BoC expects inflation to fall to its (2.0%) target in 2025. 

“..3-month annualized rates are suggesting downward momentum. The Bank expects CPI inflation to be close to 3% during the first half of this year, to move below 2½% in the second half, and reach the 2% inflation target in 2025,” said the BoC.

The Bank added that “The Council will be looking for evidence that this downward momentum is sustained.”

In particular it would be paying close attention to, “the evolution of core inflation.. the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior,” the statement added. 

Higher growth from population increase 

The BoC expects higher growth in Canada compared to its January forecasts.

“Overall, the Bank forecasts GDP growth of 1.5% in 2024, 2.2% in 2025, and 1.9% in 2026,” it said in its statement. 

In the accompanying Policy Report, the BoC stated it had revised up its forecasts for growth and revised down its forecasts for inflation in Canada (as well as the US and the world).

“The outlook for growth in Canada has been revised up, and inflationary pressures have been easing somewhat faster than anticipated in the January Report,” said the BoC in its Monthly Report. 

The BoC forecasts real GDP to grow by 2.1% year-over-year in 2024 compared to a prior forecast of 1.6%. It expected much higher growth of 1.0% YoY in Q1 of 2024 compared to 0.2% in the January report.

It forecasts CPI inflation at 2.2% YoY in 2024 compared to the 2.4% forecast in its January report. It still sees inflation at 2.1% in 2025. 

The BoC said the higher growth was as a result of increased population growth due to immigration. 

“Growth in consumption spending is stronger over the near term largely because of higher population growth,” said the report. 

In addition, export growth had been boosted by “higher foreign demand” and “new fiscal measures announced in provincial budgets.”

The BoC said it had revised down CPI inflation forecasts by 0.2% in 2024 but left it roughly unchanged in 2025. 

Inflation in goods excluding food, communications and energy had all been lower than expected.

• USD/CAD remains silent amid market caution ahead of BoC’s policy decision.
• BoC is expected to maintain its current policy rate at 5.0% on Wednesday.
• The decline in US Treasury yields contributes to undermining the US Dollar.

USD/CAD seems to remain tepid amid firmer US Dollar (USD) and Crude oil prices. The pair inches lower to near 1.3570 during the Asian session on Wednesday. The US Dollar (USD) holds ground despite lower US Treasury yields.

Traders eagerly await the release of the Bank of Canada’s (BoC) interest rate decision, with expectations of remaining unchanged at 5.0%. Additionally, US Consumer Price Index (CPI) data and the FOMC Minutes are scheduled to be released later in the North American session.

Crude oil prices encountered hurdles that potentially weighed on the Canadian Dollar (CAD). The impasse in Gaza ceasefire negotiations revived concerns about the security of supplies from the Middle East, counteracting a larger-than-anticipated increase in US Crude inventories. West Texas Intermediate (WTI) oil price hovers around $84.70 per barrel, by the press time.

The US Dollar (USD) encounters challenges amid lower US Treasury yields. At the time of writing, the US Dollar Index (DXY) consolidates around 104.10, with 2-year and 10-year yields on US Treasury bonds at 4.73% and 4.35%, respectively.

Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari reiterated the central bank's commitment to combatting inflation. Kashkari stressed the importance of bringing the current inflation rate, hovering around 3%, back down to the target level of 2%.

Investors adopt a cautious stance, expecting potential policy shifts influenced by incoming data. Strong labor market figures from last week could lead to a more hawkish stance from the Federal Reserve if inflation exceeds expectations.

• USD/CAD consolidates below 1.3600 as the focus shifts to US Inflation and BoC monetary policy.
• The US inflation data could be made or a break for market expectations of Fed rate cuts in June.
• The BoC is expected to keep interest rates steady at 5%.

The USD/CAD pair struggles for a direction as investors await the United States Consumer Price Index (CPI) data for March, which will be published on Wednesday. The Loonie asset trades sideways below the round-level resistance of 1.3600 in Tuesday’s European session. The US inflation data for March is expected to provide some cues about when the Federal Reserve (Fed) could start reducing interest rates.

US annual headline inflation is forecasted to have increased to 3.4% from 3.2% in February. In the same period, the core inflation that excludes volatile food and energy prices is estimated to have dropped slightly to 3.7% from 3.8%.

Soft inflation figures could prompt speculation that the Fed will reduce borrowing costs after the June meeting, while hot figures might shift rate cut expectations to the second half of this year.

Meanwhile, the Canadian Dollar will dance to the tunes of the Bank of Canada’s (BoC) interest rate decision, to be announced on Wednesday. The BoC is expected to keep interest rates unchanged at 5%. Therefore, investors will focus on the outlook of borrowing rates. The BoC could deliver a dovish guidance as Canada’s labor market is facing stiff consequences of higher interest rates. Also, BoC’s preferred inflation measure, core CPI, came down to 2.1% in February.

USD/CAD is slightly down from the horizontal resistance of the Ascending triangle formation on a daily timeframe, plotted from December 7 high at 1.3620. The upward-sloping border of the aforementioned pattern is placed from December 27 low at 1.3177. The chart pattern exhibits a sharp volatility contraction and a breakout can happen in any direction.

The 200-day Exponential Moving Average (EMA) near 1.3500 remains a crucial support for the US Dollar bulls.

Meanwhile, the 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating indecisiveness among market participants.

The Loonie asset would observe a fresh upside if it breaks above April 5 high at 1.3648. This will drive the asset to the round-level resistance of 1.3700, followed by November 22 high at 1.3765.

On the flip side, a downside move below February 22 low at 1.3441 would expose the asset to February 9 low at 1.3413. A breakdown below the latter would extend downside towards January 15 low at 1.3382.

USD/CAD daily chart

• USD/CAD regains some positive traction amid the emergence of some USD dip-buying.
• Reduced Fed rate cut bets push the US bond yields higher and revive the USD demand.
• Geopolitical risks lend support to Oil prices, underpinning the Loonie and capping gains.

The USD/CAD pair attracts some dip-buying during the Asian session on Tuesday and reverses a part of the previous day's losses. Spot prices, for now, seem to have stalled the recent pullback from the vicinity of mid-1.3600s or the YTD high touched last week, though remain below the 1.3600 round figure, warranting caution for bullish traders.

As investors look past the disappointing Canadian employment details released last Friday, the overnight goodish intraday rise in Crude Oil prices is seen underpinning the commodity-linked Loonie and acting as a headwind for the USD/CAD pair. The optimism over a possible ceasefire between Israel and Hamas faded rather quickly as talks remained deadlocked. Adding to this, Iran has threatened military action against Israel over an alleged strike on its embassy in Syria. This raises the risk of supply disruptions from the Middle East and lifts the black liquid closer to a five-month top set last Friday.

The downside for the USD/CAD pair, however, seems cushioned in the wake of the emergence of some buying around the US Dollar (USD), bolstered by elevated US Treasury bond yields. The upbeat monthly US jobs data (NFP) released on Friday, along with the recent hawkish remarks by several Federal Reserve (Fed) officials, suggest that the US central bank may delay cutting interest rates. This, in turn, pushes the yield on the benchmark 10-year US government bond to its highest level since late November, which helps revive the USD demand and might continue to act as a tailwind for the currency pair.

The aforementioned mixed fundamental backdrop, along with the recent repeated failures to find acceptance above the 1.3600 mark, makes it prudent to wait for strong follow-through buying before positioning for any further gains for the USD/CAD pair. Traders might also prefer to move to the sidelines and wait for more cues about the Fed's rate-cut path to determine the next leg of a directional move. Hence, the focus will remain glued to the release of the US consumer inflation figures for March and the FOMC meeting minutes on Wednesday, which will play a key role in influencing the USD price dynamics.

• USD/CAD faces pressure above 1.3600 as US Dollar fails to capitalize on strong US NFP.
• Traders have shifted expectations for Fed reducing rates in the second half of this year.
• Weak Canadian Employment boosts early BoC interest rate cuts.

The USD/CAD pair falls back to the round-level support of 1.3600 in Monday’s European session. The Loonie asset drops as the US Dollar fails to catch bid despite traders pare expectations for the Federal Reserve (Fed) to begin reducing interest rates from the June meeting.

Investors do not see the Fed reducing interest rates in June as strong United States labor market conditions have strengthened the inflation outlook. Strong demand for workers is generally offset by hiring them with higher wages, which propels consumer spending. Eventually, higher consumer spending leads to an increase in the consumer price inflation.

Going forward, investors will focus on the Consumer Price Index (CPI) data for March, which will be published on Wednesday. The annual core CPI that strips off volatile food and oil prices is forecasted to have grown at a slightly slower pace of 3.7% from 3.8% in February.

Meanwhile, expectations for early rate cuts by the Bank of Canada (BoC) have deepened due to Canada’ weak labor market data. On Friday, the Statistics Canada showed that labor market witnessed drawdown by 2.2K, while investors forecasted fresh recruitment of 25K jobs. The Unemployment Rate rose strongly to 6.1% from expectations of 5.9% and the prior reading of 5.8%. However, annual Average Hourly Earnings grew at a higher pace of 5.0% from 4.9% in February.

USD/CAD trades close to the horizontal resistance of the Ascending triangle formation on a daily timeframe, plotted from December 7 high at 1.3620. The upward-sloping border of the aforementioned pattern is placed from December 27 low at 1.3177. The chart pattern exhibits a sharp volatility contraction and a breakout can happen in any direction.

The asset remains above the 20-day Exponential Moving Average (EMA) near 1.3520, suggesting that the near-term appeal is bullish.

However, the 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating indecisiveness among market participants.

The Loonie asset would observe a fresh upside if it breaks above April 5 high at 1.3648. This will drive the asset to the round-level resistance of 1.3700, followed by November 22 high at 1.3765.

On the flip side, a downside move below February 22 low at 1.3441 would expose the asset to February 9 low at 1.3413. A breakdown below the latter would extend downside towards January 15 low at 1.3382.

USD/CAD daily chart

• USD/CAD trims intraday gains on risk-on sentiment on Monday.
• The decline in the Crude oil prices undermines the Canadian Dollar.
• The US Dollar strengthened as the likelihood of a Fed rate cut in June diminished.

USD/CAD extends its winning streak, trading higher around 1.3600 for the third consecutive session during the Asian hours on Monday. The US Dollar (USD) strengthens, supported by higher US Treasury yields, thereby exerting upward support to the USD/CAD pair.

Additionally, the decline in Crude oil prices contributes pressure to undermining the Canadian Dollar (CAD), given Canada is one of the largest Crude oil exporters to the United States (US). West Texas Intermediate (WTI) oil price extends losses to near $85.10 per barrel, by the press time.

This comes as Israel withdraws additional troops from Southern Gaza, likely in response to increasing international pressure. Moreover, peace talks between Israel and Hamas have resumed in Egypt, reducing tensions that previously fueled the recent surge in oil prices.

The Canadian Dollar encountered difficulties following the release of weaker domestic employment data on Friday. Investors are now anticipating the Bank of Canada’s (BoC) interest rate decision scheduled for Wednesday, with expectations of remaining unchanged at 5.0%.

The US Dollar Index (DXY) trades higher around 104.30, at the time of writing, propelled by a surprising beat from the Nonfarm Payrolls (NFP) report. The strong labor market performance in March, surpassing expectations, has bolstered the bullish sentiment for the US Dollar.

US Nonfarm Payrolls (NFP) reported a significant increase of 303,000 jobs in March, surpassing expectations of 200,000. However, the previous growth of 275,000 was revised downward to 270,000. According to the CME FedWatch Tool, the probability of a rate cut has decreased to 46.1%. Traders are awaiting the release of US Consumer Price Index data for March scheduled on Wednesday.

• USD/CAD rallies on strong US NFP, weak Canadian labor market data.
• The speculation for Fed to begin rate cuts could be shifted to the second half of this year.
• Canadian labors were fired over March. The jobless rate rose to 6.1%.

The USD/CAD pair prints a fresh four-month high at 1.3640 in Friday’s early American session. The Loonie asset rallies as the United States Bureau of Labor Statistics (BLS) has reported upbeat Nonfarm Payrolls and the Statistics Canada has showed poor Employment data for March.

The US NFP reported that the labor market witnessed 303K fresh payrolls, significantly better than expectations of 200K and the prior reading of 270K. The Unemployment Rate falls to 3.8% from the consensus and the prior reading of 3.9%. Strong labor demand has dented market expectations for the Federal Reserve (Fed) to begin reducing interest rates, which is currently expected from the June meeting.

Robust labor demand is generally followed by strong wage growth as employers are forced to offer higher pay due to shortage of workers. Higher wage growth boosts consumer spending, which keeps inflation stubbornly higher.

On Thursday, Minneapolis Fed Bank President Neel Kashkari said rate cuts won’t be required this year if inflation remains stall. Neel Kashkari forecasted two rate cuts by 2024 in the latest Fed’s dot plot.

Upbeat labor demand has boosted the US Dollar’s appeal. The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, extends its upside to 104.65.

Meanwhile, the Canadian Dollar weakens as workers were laid-off over month. Canada’s labor market witnessed drawdown of 2.2K workers, which investors forecasted fresh recruitment of 25K jobs. The Unemployment Rate rose strongly to 6.1% from expectations of 5.9% and the prior reading of 5.8%. However, annual Average Hourly Earnings grew at a higher pace of 5.0% from 4.9% in February.

Weak labor demand will boost expectations for the Bank of Canada (BoC) pivoting to rate cuts sooner.

• USD/CAD may find an immediate resistance area around the weekly high of 1.3588 and psychological level of 1.3600.
• A break above March’s high of 1.3614 could lead the pair to meet the major barrier of 1.3650.
• The immediate support appears at 1.3550, followed by the 50-day EMA at 1.3522.

USD/CAD extends its gains for the second consecutive session, trading higher around 1.3560 during the European session on Friday. The immediate barrier appears at a weekly high of 1.3588, followed by the psychological resistance at 1.3600 level.

A breakthrough above the psychological mark could prompt the USD/CAD pair to test March’s high of 1.3614 to approach the major barrier at the 1.3650 level.

The 14-day Relative Strength Index (RSI) is positioned above 50, suggesting bullish momentum. However, the Moving Average Convergence Divergence (MACD) suggests a tepid momentum.

The MACD line is above the centerline, indicating bullish momentum, but there is divergence below the signal line. Traders may await confirmation from the MACD, a lagging indicator, to determine the direction of the trend.

On the downside, the USD/CAD pair could find immediate support at 1.3550, followed by the 50-day Exponential Moving Average (EMA) at 1.3522 and the 23.6% Fibonacci retracement level of 1.3511.

A break below the latter could exert downward pressure on the USD/CAD pair to surpass the psychological level of 1.3500 to retest the weekly low at 1.3477 level.

USD/CAD: Daily Chart

• USD/CAD trades in positive territory for the second consecutive day around 1.3565 in Friday’s early European session. 
• Fed’s Barkin noted disinflation is likely to continue, but the pace of that remains unclear.
• Canada’s trade surplus widened to $1.39 billion in February from $0.61 billion in January, better than estimated. 

The USD/CAD pair gains traction near 1.3565 during the early European session on Friday. The rebound of the pair is bolstered by renewed US Dollar (USD) demand as the rising geopolitical tensions in the Middle East boost safe-haven flows. 

On Thursday, the Federal Reserve (Fed) Bank of Richmond President Thomas Barkin said disinflation is likely to continue, but the speed of that remains unclear. Barkin added that maintaining rates 'somewhat restrictive' will bring inflation back to target. Fed Chair Jerome Powell indicated that FOMC officials see it's appropriate to begin lowering policy rates if the economy develops as expected. 

The US labor market data for March will be due on Friday, which is likely to offer fresh insights into the Fed's outlook on interest rates. The highly-anticipated Nonfarm Payrolls (NFP) is estimated to show that the US economy added 200,000 jobs in March from a 275,000 increase in February. The Unemployment Rate is projected to remain steady at 3.9% in the same period. In the event that the US NFP data shows a strong-than-expected outcome, this could dampen June Fed rate cut expectations, providing some support to the Greenback and acting as a tailwind for the USD/CAD pair. 

On the Loonie front, Canada’s trade surplus increased to $1.39 billion in February from $0.61 billion in January, beating the estimation. This, in turn, lifts the Canadian Dollar (CAD). Additionally, the rise in oil prices due to the escalating tensions in the Middle East provides some support for the commodity-linked Loonie and might cap the upside of the USD/CAD pair. Market players will take more cues from the Canadian labour market data later in the day.