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by Daman Securities LLC

USD/CAD Analysis: Room for New Highs? 

The USD/CAD pair surged after better-than-expected NFP data was released on Friday, pushing the U.S. Dollar higher. 

At the same time, Canadian labor data showed mixed results. The unemployment rate ticked up to 6.8% and employment change increased by 50k. The data caused the Canadian Dollar to decline against other currencies, especially against the USD.

The threat of US tariffs following Donald Trump’s re-election may contribute to further CAD downside. US President-elect Donald Trump said that he would propose major hikes in tariffs on goods coming from Mexico, Canada, and China starting on the first day of his administration.

The Bank of Canada (BoC) is expected to deliver a 50-basis points rate cut on Wednesday after the same move in October, bringing its interest rate to 3.25%. This move could potentially weaken the Canadian Dollar even further. 

The BoC is expected to continue its rate cutting path despite inflation moving back above 2%. The central bank will focus on two things. First, reviving growth after October’s GDP report showed a small rise. And second, by keeping the labor market strong after unemployment rose to 6.8%, higher than forecasted.

USD/CAD is expected to be extra volatile this week with US CPI data set for release on Wednesday at 17:30 (Dubai time). On the same day, the Bank of Canada will release its next rate decision at 18:45. On Thursday, US PPI will be released at 17:30, expected to wrap up a volatile week for the currency pair.

Technical Analysis


Source: TradingView

The USD/CAD pair retreated after forming a new high at 1.41700. Price remains in a bullish trend at the time of writing, with traders watching for the potential of a continued uptrend. In a scenario where the pair pulls back towards the pivot point around 1.41, bulls may look to take control. However, in the other more bearish scenario, if the price fails to hold on to gains, traders will be eyeing a path lower where support around the 1.40500 zone may come into effect.

The information provided is not intended to serve as investment advice or a sufficient basis for making investment decisions. It is meant solely for informational purposes.

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