USD/CAD traded on the back foot Monday, hovering around 1.3932, its lowest level in two months, as the Canadian Dollar (CAD) drew support from stronger-than-expected domestic labour data and a notable rise in Oil prices. West Texas Intermediate (WTI) crude traded at approximately $80.37 per barrel, marking a 5.20% increase on the day, further bolstering the CAD's performance [1].
The recent dip in USD/CAD below the 1.4000 psychological level was attributed to contrasting US and Canadian labour market outcomes, with the US Dollar (USD) regaining some ground after last week's softer-than-expected US Nonfarm Payrolls (NFP) data. According to TD Securities, the break below 1.40 highlighted the market's focus on central-bank divergence and Canada's domestic outlook. The bank noted that while the data surprise briefly pushed USD/CAD lower, sustained bearish momentum for the USD would likely require a further downside surprise in the upcoming US Consumer Price Index (CPI) report, which could prompt markets to price out near-term Federal Reserve rate hike expectations [1].
From a technical standpoint, USD/CAD has formed a pattern of lower highs and lower lows since briefly exceeding 1.4200 in late June. The pair remains below both the 1.4000 mark and the 50-day Simple Moving Average (SMA) at 1.4075, maintaining a near-term bearish bias. Momentum indicators also favor sellers, with the Relative Strength Index (RSI) near 33—approaching oversold territory—and the MACD indicator in negative territory. Key support levels are identified at the 100-day SMA near 1.3916 and the 200-day SMA around 1.3853, with a decisive break below the latter potentially opening the door to further declines. On the upside, resistance is seen at 1.4000 and the 50-day SMA at 1.4075 [1].
The CAD was the strongest against the Japanese Yen, gaining 0.80% on the day, and showed modest gains against other major currencies, reflecting broad-based strength in the Canadian Dollar [1].
CONCLUSION
USD/CAD's decline below 1.4000 reflects the Canadian Dollar's resilience amid strong domestic data and surging oil prices. Market participants are now focused on the upcoming US CPI report, which could further influence Fed rate expectations and the pair's direction. Technical indicators suggest a bearish bias persists unless a significant reversal occurs above key resistance levels.