USD/CAD Price Analysis: Bounces off 200-day SMA neighborhood ahead of US/Canadian jobs data

The USD/CAD pair attracts some dip-buying on Friday and climbs closer to mid-1.4100s during the first half of the European session. Spot prices, for now, seem to have snapped a three-day losing streak to a fresh year-to-date trough (YTD) touched on Thursday, though the upside potential seems limited ahead of the release of monthly employment details from the US and Canada.

Heading into the key data risk, concerns that an all-out global trade war could slow economic growth, and dent fuel demand drag Crude Oil prices drop back closer to the YTD low. Moreover, eight OPEC+ members unexpectedly advanced their plan to phase out production cuts and raise combined crude oil output by 411,000 barrels per day in May. This, in turn, sparks oversupply concerns and weighs on the black liquid, which is seen undermining the commodity-linked Loonie and lending some support to the USD/CAD pair.

The Canadian Dollar (CAD) is also pressured by the risk of a further escalation of the US-Canada trade war and domestic political uncertainty ahead of the snap election on April 28. Canadian Prime Minister Mark Carney said on Thursday that the previously announced retaliatory tariffs will remain in effect and that Canada will impose 25% tariffs on all vehicles imported from the US that are not compliant with the USMCA trade deal. However, the underlying bearish tone surrounding the US Dollar (USD) might cap the USD/CAD pair.

Traders ramped up expectations that the Federal Reserve will resume its rate-cutting cycle in June and lower borrowing costs four times by the year-end as Trump's trade policies reignite US recession fears. This, in turn, drags the yield on the benchmark 10-year US government bond below the 4.0% threshold for the first time in six months and fails to assist the USD to build on the overnight bounce from the lowest level since October. Hence, strong follow-through buying is needed before confirming that the USD/CAD pair has bottomed out.

Traders might also refrain from placing aggressive bets and opt to wait for the closely-watched US Nonfarm Payrolls (NFP) report, which is likely to overshadow Canadian jobs data. Apart from this, trade-related headlines will influence the broader market risk sentiment and drive the USD demand. This, along with Oil price dynamics, should contribute to producing short-term trading opportunities around the USD/CAD pair. Nevertheless, spot prices remain on track to end deep in the red and register losses for the second successive week.

USD/CAD daily chart

Technical Outlook

From a technical perspective, this week’s close below the 100-day Simple Moving Average (SMA) for the first time since October 2024 was seen as a fresh trigger for bearish traders. The downfall, however, stalls ahead of the very important 200-day SMA. Moreover, the subsequent bounce warrants some caution before positioning for an extension of the recent downward trajectory from a multi-year peak touched in March.

Meanwhile, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. Hence, any further recovery is more likely to attract fresh sellers near the 1.4200 round figure and remain capped near the 1.4235-1.4240 region. That said, a sustained strength beyond the latter could lift the USD/CAD pair beyond the 1.4300 mark, though the momentum could fizzle out near the 1.4380 region, or the 100-day SMA.

On the flip side, the 1.4100 mark now seems to protect the immediate downside ahead of the 1.4030-1.4025 region, a multi-month low touched on Thursday, and the 1.4000 psychological mark. The latter nears the 200-day SMA, which if broken decisively should pave the way for deeper losses. The USD/CAD pair might then slide to the 1.3930 intermediate support en route to the 1.3900 mark and the 1.3825-1.3815 congestion zone.