USD/CAD Climbs on Weak Oil Prices and Mixed Fed Expectations
The USD/CAD pair climbed to around 1.4280 during early European trading on Monday. Oil prices dropped due to rising crude exports from the Middle East and G7 nations' oil releases, weakening the Canadian Dollar (CAD) against the US Dollar (USD). Canada, being a major oil exporter, typically sees its currency decline when crude oil prices fall.
Recent soft US jobs data reduced expectations of a Federal Reserve (Fed) rate hike in October. The US Non-Farm Payrolls (NFP) rose by only 29K in September, far below market expectations of 90K. Traders now see just a 22.1% chance of a rate hike this month, down from around 70% earlier in the week.
TD Securities noted a sharp repricing in Canadian rates, with the 10-year yield peaking above 4% and the 2s10s curve steepening. Despite elevated yields, they expect a moderation by year-end. Fed’s Logan delivered a hawkish message, boosting Fed expectations and supporting the Dollar. The FXS Fed Sentiment Index rose to 136.59, indicating stronger tightening expectations.
Technically, USD/CAD remains bullish but overbought, with the Relative Strength Index (RSI) at 79.3. Immediate resistance is at 1.4350, while support lies at 1.4221 and 1.4129. A break above 1.4350 could target the April 1 high of 1.4415 and the March 3, 2025 high of 1.4542.