FX.co ★ USD/CAD: Analysis and Forecast

Today, the USD/CAD pair is regaining positive momentum as lower crude oil prices weaken the Canadian dollar.

Crude oil prices remain under pressure for the third consecutive day due to concerns over a potential supply glut and slowing global demand, particularly in China, the world's largest importer.

OPEC+ (the Organization of Petroleum Exporting Countries and its allies) has delayed planned production increases until April 2025. Additionally, the full phase-out of production cuts has been extended until the end of 2026. This weakens the commodity-linked Canadian dollar, providing gradual support for the USD/CAD pair.

At the same time, geopolitical tensions, U.S. economic resilience, and hopes for expansionary policies under U.S. President-elect Donald Trump may support crude oil prices.

Meanwhile, the U.S. dollar remains stagnant near multi-week lows. Dollar bulls are awaiting the U.S. nonfarm payrolls (NFP) report, which is scheduled for release during the North American session. This data will shape expectations for Federal Reserve interest rate cuts, influencing the short-term price action of the U.S. dollar and providing fresh directional momentum for USD/CAD.

Additionally, speeches from prominent FOMC members could induce market volatility, creating trading opportunities in USD/CAD. However, these speeches may overshadow Canada's employment report. A stronger-than-expected jobs report in Canada could lower expectations for further Bank of Canada rate cuts in December. This, in turn, may discourage bearish sentiment toward the Canadian dollar.

Technical Analysis

Bullish indicators on the daily chart suggest the potential for further gains. However, repeated failures this week near the 1.4100 psychological level warrant caution for bulls. Sustained strength beyond this level could propel USD/CAD toward the multi-month high of 1.4180, last reached in November. The momentum may extend further toward the 1.4200 psychological level.

On the other hand, a break below the 1.4000 psychological level would expose USD/CAD to continued retracement from its multi-year highs. Spot prices could decline toward the 1.3955 support level and potentially reach the previous week's swing low near 1.3925. Below this, the 1.3900 round level comes into focus, and a break below it could drag spot prices to November's lows.

Key Levels to Watch

Resistance:

• 1.4100 (psychological level)
• 1.4180 (multi-month high from November)
• 1.4200 (psychological level)

Support:

• 1.4000 (psychological level)
• 1.3955 (intermediate support)
• 1.3925 (last week's low)
• 1.3900 (psychological level)

Conclusion

The trajectory of the USD/CAD pair will largely depend on U.S. labor market data and Canadian employment figures, as well as evolving crude oil price dynamics.