USD/CAD remains depressed below mid-1.3400s, downside potential seems limited

Source Fxstreet
  • USD/CAD trades with a mild negative bias for the third straight day on Monday.
  • The downside, however, seems cushioned amid a pullback in Crude Oil prices.
  • The Fed rate-cut uncertainty might further contribute to limiting the downside.

The USD/CAD pair remains on the defensive for the third successive day on Monday, albeit lacks follow-through selling and manages to hold above last week's swing low, around the 1.3415 region. Moreover, a combination of diverging forces warrants some caution before placing aggressive bearish bets and positioning for an extension of the recent pullback from the vicinity of the monthly peak tested last Thursday.

Houthi rebels stepped up their attacks on vessels in the Red Sea and a drone attack on US forces by radical Iran-backed militant groups killed three soldiers. This raises the risk of a further escalation of tensions in the Middle East and fueled concerns over supply disruption in the region, pushing Crude Oil prices to a nearly two-month high on Monday. The commodity, however, struggles to capitalize on the move as traders opt to take some profits off the table ahead of the OPEC+ meeting on February 1. This, in turn, could undermine the commodity-linked Loonie, which, along with the underlying bullish sentiment surrounding the US Dollar (USD) should lend support to the USD/CAD pair.

Progress towards achieving the Federal Reserve's (Fed) 2% inflation target takes further tightening off the table, though market participants remain uncertain over the timing of the first rate cut. The Personal Income and Spending data released on Friday pointed to strong demand from US consumers. This, along with last week's upbeat US Q4 GDP print, suggested that the economy is still in good shape and should allow the Fed to keep interest rates higher for longer. This, along with geopolitical tensions, assists the safe-haven buck to stand tall near its highest level since December 13 touched earlier this week and might further contribute to limiting any further decline for the USD/CAD pair.

Traders might also refrain from placing aggressive directional bets and prefer to wait for the outcome of the highly-anticipated FOMC monetary policy meeting on Wednesday. Investors this week will also confront the release of important US macro data scheduled at the beginning of a new month, including the closely-watched monthly employment details or the Nonfarm Payrolls (NFP) report on Friday. This will drive the USD demand and provide some meaningful impetus to the USD/CAD pair. In the meantime, Oil price dynamics could allow traders to grab short-term opportunities on Monday in the absence of any relevant market moving economic releases either from the US or Canada.

Technical levels to watch

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Gold ends three-week slide at the $4,400 line — eight straight days of ETF inflows vs a 5% 10-year and a 100 dollarSpot gold closed Friday at $4,378.39, up 0.84% on the day and about 0.8% for the week — its first weekly gain in four weeks — with the intraday high of $4,399.67 leaving it 33 cents shy of the $4,400 line. Gold ETFs have now logged eight straight sessions of inflows, but with the 10-year back above 5% and the dollar index near 100, here is what decides whether this is a reversal or a bounce.
Author  Suzie
Sep 20, Sun
Spot gold closed Friday at $4,378.39, up 0.84% on the day and about 0.8% for the week — its first weekly gain in four weeks — with the intraday high of $4,399.67 leaving it 33 cents shy of the $4,400 line. Gold ETFs have now logged eight straight sessions of inflows, but with the 10-year back above 5% and the dollar index near 100, here is what decides whether this is a reversal or a bounce.
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
US input costs rose at the fastest pace in four years — the September flash PMI beat is an inflation story, not a growth storyUS September flash PMIs came in far above expectations, with the composite at 58.4, a five-year high. But the detail that moved markets was input cost inflation at its fastest since October 2022, driven by fuel, transport and supply shortages. Brent is back above $100 and the 10-year Treasury yield has hit its highest since 2007.
Author  Suzie
Sep 24, Thu
US September flash PMIs came in far above expectations, with the composite at 58.4, a five-year high. But the detail that moved markets was input cost inflation at its fastest since October 2022, driven by fuel, transport and supply shortages. Brent is back above $100 and the 10-year Treasury yield has hit its highest since 2007.
placeholder
Brent edges toward $99 as Trump rejects Iran's Hormuz proposal — why the war-risk premium won't rebuildBrent crude rose 0.92% to $98.51 and WTI gained 1.15% to $93.51 after President Trump rejected Iran's seven-day proposal to reopen the Strait of Hormuz. But both benchmarks remain about 12% below their early-September highs, because supply never actually stopped. Hormuz flows ran at 33.7 million barrels this week, in line with the prior week, and Saudi Arabia's East-West pipeline restarted on September 22.
Author  Suzie
19 hours ago
Brent crude rose 0.92% to $98.51 and WTI gained 1.15% to $93.51 after President Trump rejected Iran's seven-day proposal to reopen the Strait of Hormuz. But both benchmarks remain about 12% below their early-September highs, because supply never actually stopped. Hormuz flows ran at 33.7 million barrels this week, in line with the prior week, and Saudi Arabia's East-West pipeline restarted on September 22.
placeholder
Four jobs reports in five days: what JOLTS, ADP, claims and the September payrolls mean for the October Fed decisionThe US labour market faces its densest data week of the month. JOLTS job openings land Tuesday (7.2 million expected), ADP on Wednesday (70,000 expected), initial claims on Thursday and the September non-farm payrolls on Friday (100,000 expected, down from 162,000). Markets price a 64%-70% chance of another quarter-point Fed hike on October 28. The dollar index sits at 100.77 and the S&P 500 at 7,729.8.
Author  Mitrade
18 hours ago
The US labour market faces its densest data week of the month. JOLTS job openings land Tuesday (7.2 million expected), ADP on Wednesday (70,000 expected), initial claims on Thursday and the September non-farm payrolls on Friday (100,000 expected, down from 162,000). Markets price a 64%-70% chance of another quarter-point Fed hike on October 28. The dollar index sits at 100.77 and the S&P 500 at 7,729.8.
Related Instrument
goTop
quote