USD/CAD: Momentum in full swing as the tide favors buyers

USD/CAD continues to move steadily higher.
Buyers remain supported by a hawkish Fed and retreating Oil prices.

Olalekan Akinola Independent Analyst

The 1.4020 area may temporarily stall the advance, but 1.4100 remains in sight

USD/CAD is up more than 1% this month, having climbed from 1.3757 on September 8. The pair has cleared the resistance provided by the upper boundary of its ascending channel around 1.3880 and is now trading near 1.4020.

On the US side of the equation, the Federal Reserve’s hawkish rate hike and expectations of further tightening continue to support the dollar, with the DXY holding around the 100.00 mark. The US economic calendar is relatively light this week, leaving little in the way of major data capable of immediately changing the dollar’s direction.

The Bank of Canada recently sounded the alarm over inflationary pressures. However, last week’s data broadly aligned with expectations: headline inflation stood at 3.0%, while CPI-trim remained unchanged at 1.9%. Retreating oil prices have also weakened support for the Canadian dollar, with WTI pulling back sharply after recently trading above $107 per barrel.

USD/CAD directional bias remains skewed to the upside

USD/CAD is trading around 1.4020, where the pair could face some resistance. However, momentum remains firmly with buyers. A sustained break above this level would bring 1.4100 into focus, followed by the psychological resistance around 1.4200.

The recent advance has been steep, with very little in the way of meaningful pullbacks, suggesting strong bullish momentum. The Average Directional Index supports this view, with the ADX currently around 48—well above the commonly watched 25 threshold and signaling a strong underlying trend.

The directional bias remains tilted to the upside, supported by retreating oil prices, a hawkish Fed and elevated US bond yields. A rebound in oil prices may not be enough on its own to reverse the pair’s direction, although it could trigger a temporary pullback.

It would likely take a meaningful shift towards a more hawkish Bank of Canada policy path—or a significant reduction in expectations for further Fed tightening—for sellers to regain control.

Author

Olalekan Akinola

Independent Analyst

Olalekan Akinola is a financial-markets analyst and writer with five years of experience covering forex, commodities, and global macroeconomic developments.

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