USD/CAD Price Analysis: Bears now ready to give up yet; US NFP report awaited

The USD/CAD pair meets with a fresh supply on Friday and reverses a part of the previous day's move higher. Spot prices drop back closer to the 1.3800 mark during the early European session and remain well within striking distance of the lowest level since October 2024 set earlier this week. The incumbent Canadian Prime Minister Mark Carney’s victory in Monday's election marked the end of domestic political uncertainty. Apart from this, a further recovery in Crude Oil prices underpins the commodity-linked Loonie and exerts some pressure on the currency pair amid a modest US Dollar (USD) pullback from a three-week high touched on Thursday.

China's Commerce Ministry said that the US has recently, through relevant channels, actively conveyed messages to engage in talks on tariff issues and the country is assessing the proposal to initiate negotiations. Furthermore, US Secretary of State Marco Rubio told Fox News that China wants to meet and talk, raising hopes for the potential de-escalation of a bitter trade war between the world's two largest economies and easing fuel demand concerns. Adding to this, US President Donald Trump's threat to impose secondary sanctions against any country buying Iranian oil assist the black liquid to build on the overnight bounce from a three-week low.

The minutes from the Bank of Canada’s (BoC) policy meeting held on April 16 revealed a divided Governing Council over whether to cut or hold rates steady, especially with US tariffs in flux. The central bank, however, emphasized the need to maintain a cautious stance. Moreover, Trump's retreat from sweeping reciprocal tariffs has reduced the urgency of economic stimulus and lowered expectations for near-term policy easing. In contrast, traders ramped up their bets that the Federal Reserve (Fed) will deliver four quarter-point rate reductions by the year-end following data showing a surprise contraction in the US Q1 GDP for the first time since 2022.

Moreover, the Personal Consumption and Expenditure (PCE) Price Index pointed to signs of easing inflation. Adding to this, the US ADP report on private-sector employment suggested that the US labor market is cooling. The view was further reinforced by a rise in the US Initial Jobless Claims to 241,000 in the week ended April 26 or the the highest level since February. Hence, the focus remains glued to the release of the US Nonfarm Payrolls (NFP) report, due later during the early North American session. The crucial US jobs data might provide cues about the Fed's policy outlook, which will drive the USD and provide a fresh impetus to the USD/CAD pair.

USD/CAD 4-hour chart

Technical levels to watch

From a technical perspective, spot prices remain confined in a familiar trading band held over the past two weeks or so. Against the backdrop of the recent sharp pullback from over a two-decade high touched in February, the range-bound price action might still be categorized as a bearish consolidation phase. Moreover, oscillators on the daily chart are holding in negative territory and are still away from being in the oversold zone. This, in turn, favors bearish traders and suggests that the path of least resistance for the USD/CAD pair remains to the downside.

That said, it will still be prudent to wait for acceptance below the 1.3800 mark and a subsequent slide below the 1.3780 region, or the YTD low touched last week, before positioning for further losses. The USD/CAD pair might then accelerate the fall towards the 1.3740 intermediate support before eventually dropping to test sub-1.3800 levels.

On the flip side, the overnight swing high, around the 1.3860 region, now seems to act as an immediate hurdle ahead of the 1.3900 mark. The latter represents the top end of the trading range, which if cleared might trigger a short-covering move and lift the USD/CAD pair to the 1.3950-1.3955 region. Any subsequent move up, however, might still be seen as a selling opportunity and remain capped near the 200-day Simple Moving Average (SMA), currently pegged around the 1.4000 psychological mark.