USD/CAD Price Forecast: Bulls await move beyond multi-year peak/1.4175-1.4180 region

• USD/CAD consolidates Friday’s strong move up and is influenced by a combination of diverging forces. 
• Expectations for a less dovish Fed lend support to the pair amid bets for a jumbo BoC interest rate cut.
• A goodish rebound in Crude Oil prices underpins the Loonie and caps any further gains for the major.

The USD/CAD pair edges higher at the start of a new week and climbs back closer to its highest level since April 2020 touched last month, though it lacks follow-through buying. A modest US Dollar (USD) strength lends some support to spot prices, though rebounding Crude Oil prices underpin the commodity-linked Loonie and caps any further move up. 

The US Nonfarm Payrolls (NFP) report released on Friday revealed that the Unemployment Rate edged up to 4.2% in November from 4.1%, reaffirming bets that the Federal Reserve (Fed) is unlikely to pause in its easing cycle in December. Additional details, meanwhile, showed that the US economy added 227K jobs in November against the previous month's upwardly revised 36K and 200K anticipated. Furthermore, the Average Hourly Earnings held steady at 4% vs 3.9% forecasted, suggesting that the Fed could adopt a less dovish stance amid hopes that US President-elect Donald Trump's expansionary policies will boost inflation. This, in turn, assists the USD to move away from a nearly one-month low and acts as a tailwind for the USD/CAD pair. 

The Canadian Dollar (CAD), on the other hand, is undermined by a jump in the domestic unemployment rate to 6.8% in November. This comes on top of a modest 1% annualised growth in the third quarter and boosted chances of a large interest rate cut by the Bank of Canada (BoC) later this month. That said, a solid recovery in Crude Oil prices, from a three-week low touched on Friday, helps limit the downside for the commodity-linked Loonie and caps gains for the USD/CAD pair. The OPEC+ last week decided to postpone planned supply increases by three months until April and extend the full unwinding of cuts by a year until the end of 2026. Moreover, the geopolitical risk premium prompts some short-covering around the black liquid. 

However, concerns about a slowdown in demand from China – the world's top oil importer – and a potential supply glut might cap any meaningful upside for Crude Oil prices. This suggests that any meaningful corrective pullback in the USD/CAD pair might still be seen as a buying opportunity and remain limited in the absence of any relevant market-moving economic releases either from the US or Canada. Traders might also opt to move to the sidelines and await the release of the latest US consumer inflation figures on Wednesday for cues about the Fed's rate-cut path. This, in turn, will play a key role in influencing the near-term USD price dynamics and determining the next leg of a directional move for the currency pair.

Technical Outlook

From a technical perspective, bulls need to wait for sustained strength beyond the 1.4175-1.4180 region, or the multi-year peak, before placing fresh bets. Some follow-through buying beyond the 1.4200 mark will reaffirm the near-term positive outlook and lift the USD/CAD pair to the 1.4265 region and the April 2020 swing high, around the 1.4300 neighborhood. 

On the flip side, any meaningful corrective pullback is more likely to attract fresh buyers and remain limited near the 1.4100 mark. The said handle should act as a key pivotal point, which if broken decisively might prompt some technical selling and drag the USD/CAD pair to an intermediate support near the 1.4050 area en route to the 1.4000 psychological mark.