Canadian Dollar holds near September 16 highs against USD ahead of Friday’s jobs data

• Post-election weakness in the US Dollar leaves USD/CAD facing selling pressure for a second consecutive day.
• Expectations of a Fed rate rise cushion the USD, while weaker oil prices weigh on the Loonie and lend the pair support.
• Friday’s monthly employment reports from the US and Canada also keep traders on the sidelines.

Trading around the mid-1.3900s in Thursday’s early European session, USD/CAD is close to the low reached the previous day, its weakest level since 16 September. The pair continues to face selling pressure for a second consecutive day.

A Democratic sweep in the US midterm elections has heightened concerns about fiscal gridlock, potentially constraining government spending and slowing economic growth. Against that backdrop, the US Dollar (USD) has fallen to its lowest level since late September. The result has also reduced expectations that US President Donald Trump will resume military strikes against Iran, encouraging hopes that the Middle East conflict could end. Those hopes add to the pressure on the safe-haven dollar and, in turn, are seen weighing on USD/CAD.

Crude oil has meanwhile fallen to a two-month low on the latest optimism, easing inflation concerns and pushing US bond yields further down. Even so, investors continue to price in a more than 80% probability that the US Federal Reserve (Fed) will increase borrowing costs again in December. A geopolitical risk premium also persists as the US and Iran remain at an impasse over the Strait of Hormuz. These factors restrain further USD declines, while lower oil prices weaken the commodity-linked Loonie and could underpin USD/CAD.

With monthly employment figures from both the US and Canada due on Friday, traders may hold off on taking fresh directional positions. For guidance on the Fed’s future policy course, markets will scrutinise the closely watched US Nonfarm Payrolls (NFP) report and speeches by influential FOMC members, with implications for USD demand. Geopolitical developments could also generate volatility and shape oil price movements, giving USD/CAD a meaningful trading catalyst.

USD/CAD trades lower on the 4-hour chart

Technical Analysis Points to a Bearish Bias

Below both the 200-period Simple Moving Average (SMA) at 1.4119 and the 61.8% Fibonacci retracement of the latest advance at 1.3970, USD/CAD retains a bearish bias on the four-hour chart. The next notable support lies at the 78.6% retracement at 1.3880. Should the correction deepen, buyers would be expected to take greater interest around the lower support area at 1.3765.

Any recovery would first encounter resistance at the 61.8% Fibonacci retracement at 1.3970, before the 50% level at 1.4033 and the 38.2% retracement at 1.4097. Further up, the 200-period SMA at 1.4119 and the 23.6% retracement at 1.4175 stand between the pair and its recent cycle high near 1.4302.

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