Canadian Dollar steadies as Fed pause bets clash with resilient US economy

Source Fxstreet
  • USD/CAD trades around 1.4240 on Thursday, posting a modest 0.07% gain on the day.
  • The US Dollar remains supported by elevated Treasury yields and solid US economic data.
  • Canadian manufacturing activity slows in September but remains in expansion territory.

USD/CAD trades around 1.4240 at the time of writing on Thursday, little changed on the day with a modest 0.07% gain. The pair remains supported by the strength of the US Dollar (USD), as United States (US) Treasury yields remain elevated and the latest US economic data point to continued resilience in the economy.

The US Dollar receives support from a decline in US Initial Jobless Claims. New applications for unemployment benefits fell to 197K in the week ending September 26, from 198K previously and below the 201K initially expected. The four-week moving average also declined to 200K, while Continuing Jobless Claims fell by 11K to 1.701M.

The figures add to data released on Wednesday, when the ADP report showed that the US private sector added 90K jobs in September, beating expectations of 70K and accelerating sharply from the 36K increase recorded in August. US second-quarter Gross Domestic Product (GDP) growth was also revised higher to an annualized rate of 2.2% from 1.5% previously.

US manufacturing activity also remains solid despite losing some momentum. The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) edged lower to 54.5 in September from 54.6 previously, missing expectations of 55. However, the report's components remained robust, with the Employment Index rising to 52.7 and the New Orders Index climbing to 55.3. Price pressures also intensified, with the Prices Paid Index jumping to 77.9 from 71.1 in August.

The combination of resilient economic activity and persistent inflationary pressures leaves the Federal Reserve (Fed) with room to maintain a restrictive monetary policy stance. However, expectations of further monetary tightening have eased following Wednesday's softer-than-expected core Personal Consumption Expenditures (PCE) inflation data. Markets now see around a 36% chance of an interest-rate hike at the October 27-28 meeting, according to the CME FedWatch tool.

Against this backdrop, the benchmark 10-year US Treasury yield trades around 5.32% on Thursday after reaching 5.34%, its highest level since 2002. Elevated yields continue to support the Greenback, while investors also monitor geopolitical tensions. US President Donald Trump told Time Magazine that an escalation of bombing against Iran after the midterm elections was possible, as negotiations between Washington and Tehran remain deadlocked.

On the Canadian side, the Canadian Dollar (CAD) receives little support from the latest domestic data. Canada's S&P Global Manufacturing PMI slowed to 51.5 in September from 53 in August. A reading above 50 still indicates an expansion in manufacturing activity, but the slowdown limits support for the Loonie against a firm US Dollar.

USD/CAD technical analysis

Chart Analysis USD/CAD


In the one-hour chart, USD/CAD trades at 1.4242, holding a constructive bullish bias as it remains above both the 100-period simple moving average (SMA) at 1.4189 and the 200-period SMA at 1.4136. The pair is also supported by a dense band of horizontal levels just beneath spot, with the nearest at 1.4232 and 1.4200, while the Relative Strength Index (14) around 57 suggests positive but not overextended momentum after the recent advance.

On the topside, immediate resistance is located at 1.4260, where a horizontal barrier caps further gains in the near term. On the downside, initial support is seen at 1.4232, followed by 1.4200 and 1.4175, with deeper demand emerging near 1.4150 and the 200-period SMA at 1.4136; below that, 1.4133 and 1.4100 guard a more significant pullback before the lower support band at 1.4025, 1.3974 and 1.3945.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Weekly Market Outlook: U.S. October CPI Focus and Powell and Fed Officials SpeakInsights – This week, the U.S. will release October CPI data, with inflation expected to face challenges in easing further. Retail sales data will also be closely watched for insights into the economy, guiding the Fed's future policy.
Author  Mitrade
Nov 11, 2024
Insights – This week, the U.S. will release October CPI data, with inflation expected to face challenges in easing further. Retail sales data will also be closely watched for insights into the economy, guiding the Fed's future policy.
placeholder
October hike odds climb toward 60% as Goldman and BofA both flip — what Warsh's "dose of accommodation" really changedRate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
Author  Irene Q.
Sep 23, Wed
Rate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
placeholder
【Daily Brief】30-year Treasury tops 5.59%, S&P 500 slips to 7,670 and gold holds $4,180 — PCE lands tonightThe 30-year Treasury yield closed at 5.59%, its highest since June 2002, and the Dow fell 131.59 points to 51,349.92. US consumer confidence dropped to 81.9, a 12-year low, and JOLTS job openings fell to 7.1 million. August PCE and Q3 GDP both land at 8:30am ET tonight.
Author  Suzie
Sep 30, Wed
The 30-year Treasury yield closed at 5.59%, its highest since June 2002, and the Dow fell 131.59 points to 51,349.92. US consumer confidence dropped to 81.9, a 12-year low, and JOLTS job openings fell to 7.1 million. August PCE and Q3 GDP both land at 8:30am ET tonight.
placeholder
Gold falls to near $4,150 as higher Treasury yields, oil prices outweigh softer PCE inflationGold price (XAU/USD) tumbles to near $4,150 during the early Asian session on Thursday, pressured by elevated US Treasury bond yields. Traders await the US September employment data for fresh impetus, which will be released later on Friday. 
Author  FXStreet
Oct 01, Thu
Gold price (XAU/USD) tumbles to near $4,150 during the early Asian session on Thursday, pressured by elevated US Treasury bond yields. Traders await the US September employment data for fresh impetus, which will be released later on Friday. 
placeholder
WTI Price Forecast: Dips to $91.50 as Middle East jitters limit lossesWest Texas Intermediate (WTI) – the benchmark US Crude Oil price – attracts some sellers during the Asian session on Friday, snapping a two-day winning streak and stalling the previous day's recovery from the vicinity of a nearly four-week low.
Author  FXStreet
Oct 02, Fri
West Texas Intermediate (WTI) – the benchmark US Crude Oil price – attracts some sellers during the Asian session on Friday, snapping a two-day winning streak and stalling the previous day's recovery from the vicinity of a nearly four-week low.
Related Instrument
goTop
quote