USD/CAD Climbs Above 1.4250 Despite Overbought Conditions
The USD/CAD pair edged higher to around 1.4280 during Monday’s early European trading session. The Canadian Dollar (CAD) weakened against the US Dollar (USD) as falling oil prices added to supply pressures, negatively impacting the commodity-linked Loonie. Canada, being a major oil exporter, typically sees a decline in its currency when crude oil prices drop.
Recent softer-than-expected US jobs data reduced expectations of a Federal Reserve (Fed) rate hike in October. The US Non-Farm Payrolls (NFP) report showed a rise of just 29K in September, significantly below the market forecast of 90K. As a result, traders now see only a 22.1% probability of a rate hike this month, down from around 70% earlier in the week, according to the CME FedWatch Tool.
TD Securities noted a sharp repricing in Canadian rates, with the 10-year yield peaking above 4% and the 2s10s curve steepening. Analysts highlighted a divergence between cross-market and outright moves, emphasizing the importance of relative performance between Canada and the US in positioning along the 10- to 50-year sector.
Technical analysis indicates that USD/CAD remains in a bullish trend, with immediate resistance at 1.4350 and initial support at 1.4221. The pair is currently overbought, suggesting a potential pullback, but the broader uptrend remains intact.