Canadian Dollar advances even as oil prices fall

• Strong jobs figures have raised the odds of a December Fed rate hike, potentially supporting USD/CAD.
• Forthcoming US CPI and PPI releases are in focus as traders seek further clues to central bank policy.
• The commodity-linked Canadian dollar remains under pressure as crude oil prices slide.

Strong US labour market figures have increased the likelihood of a December Federal Reserve rate hike, potentially helping the US Dollar (USD) recover and limiting losses in USD/CAD. The pair has slipped after two consecutive days of gains and is trading near 1.4110 in Monday’s Asian session. Attention now turns to Tuesday’s US Consumer Price Index (CPI) release and Friday’s Producer Price Index (PPI) report, as investors look for further indications of the Fed’s next policy decisions.

October’s Nonfarm Payrolls (NFP) rose by 165,000, comfortably exceeding the consensus forecast of 65,000 and following September’s revised increase of 60,000. Meanwhile, the Unemployment Rate eased to 4.1%, below expectations of 4.2%. These strong employment readings are lending considerable support to the US dollar. According to the CME FedWatch tool, the likelihood of a further 25-basis-point rate increase at the December Federal Open Market Committee (FOMC) meeting has risen above 78%.

Falling oil prices are also putting pressure on the commodity-linked Canadian Dollar (CAD), which could provide support for USD/CAD. Crude retreated after US President Donald Trump described further military strikes on Iran as "highly unlikely," on condition that progress on Iran’s nuclear programme continues and the Strait of Hormuz stays open. He also said the unpopular Middle East conflict, which drove energy costs higher, had contributed to the Republicans’ recent midterm election losses.

Reuters reported that, during a telephone interview with CNN, Trump reiterated that further military action would probably not be needed if Iran signed a firm agreement. Although he had previously suggested that major attacks could resume after the midterms, the US has not launched any large-scale military operations. Iran, for its part, has warned that any future strikes would prompt retaliation against US and Israeli assets.

Technical Analysis: USD/CAD Holds Above Key EMAs

Trading at 1.4110 on the daily chart, USD/CAD remains above its 50- and nine-day Exponential Moving Averages (EMAs). This positioning points to a constructive near-term outlook as the recovery from recent lows continues. At 55.3, the 14-day Relative Strength Index (RSI) has retreated from earlier overbought extremes. It nevertheless remains in neutral-to-positive territory, suggesting that bullish momentum persists without appearing overstretched.

The 50-day EMA at 1.4054 offers the first downside support, with the nine-day EMA close behind at 1.4047. Together, they form a narrow demand zone that supports the short-term trend while it remains intact. As the supplied dataset identifies no clear resistance levels, traders would likely look for signs of exhaustion at psychological levels and recent swing highs above 1.4111. A daily close below the EMA cluster, however, would weaken the bullish outlook and indicate a deeper corrective phase.

(An AI tool assisted in preparing this article’s technical analysis. Find out more.)