- Oil prices fell as concerns about supply disruptions diminished.
- The pair received support from the positive US nonfarm payrolls report released on Friday.
- Traders are anticipating an 86% probability of a 50-basis point Fed rate cut this November.
The analysis of USD/CAD indicates potential further gains for the pair as the Canadian dollar weakens along with declining oil prices. Concurrently, the dollar has strengthened as traders reassess their Fed rate cut expectations.
–Interested in exploring day trading brokers? Check out our comprehensive guide-
On Tuesday, oil prices dropped as fears of supply disruptions eased following Iran’s attack on Israel. Market activity has stalled as participants await Israel’s potential response. Any retaliation could result in strikes on Iranian oil, tightening supply and driving prices higher. This decline in oil has significantly impacted the Canadian dollar, leading to a rally in the USD/CAD pair.
Additionally, the pair bolstered its position following Friday’s US nonfarm payrolls report, which altered the forecast for Fed rate cuts. Prior to the report, markets had estimated a greater than 30% likelihood of a 50-bps cut in November. However, the report indicated an unexpected addition of 254,000 jobs in the US, with the unemployment rate falling to 4.1%, signifying a robust labor market. Subsequently, market expectations shifted to an 86% chance for the same rate cut in November.
This transition from an aggressive to a gradual approach is potentially positive for the dollar, at least temporarily. As long as borrowing costs continue to decrease, the greenback may face challenges. Attention is now directed towards the upcoming US CPI report. Inflation has been consistently on the decline, with economists predicting it to hit 2.3% in September. Policymakers are also increasingly confident in achieving the 2% inflation target. Thus, the report may not drastically alter rate cut expectations.
Key USD/CAD Events Today
There are no major reports anticipated from either Canada or the US today. As a result, market participants will be closely monitoring the developments regarding the ongoing conflict in the Middle East.
USD/CAD Technical Price Analysis: Limited Bullish Momentum
From a technical standpoint, the USD/CAD pair has experienced a strong rally following its breakout above and subsequent retest of the 30-SMA. It has subsequently surpassed several important resistance levels, with bulls now aiming for the 1.3650 resistance zone.
-Looking for the best AI Trading Brokers? Consult our comprehensive guide-
However, the RSI is currently positioned in the overbought zone, signaling limited momentum for the bulls. This suggests that they may require a pullback before attempting to breach the 1.3650 level. A retracement could present an opportunity for the pair to retest the 1.3600 level or the 30-SMA.
Ready to trade forex? Invest at eToro!
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
