USD/CAD Price Forecast: Bulls retain control near two-month top ahead of US PPI/Canadian jobs data

The USD/CAD pair attracts buyers for the eighth successive day on Friday and trades above mid-1.3700s, or a two-month top during the first half of the European session. Crude Oil prices fail to capitalize on the overnight strong gains amid concerns about global oversupply. This, along with expectations for a larger interest rate cut by the Bank of Canada (BoC), undermines the commodity-linked Loonie and acts as a tailwind for the currency pair.

Meanwhile, worries over a potential Israeli attack on Iranian oil infrastructure and supply disruptions caused by Hurricane Milton in the US could help limit losses for Crude Oil prices. In fact, Israeli Defence Minister Yoav Gallant promised earlier this week that any strike against Iran would be "lethal, precise and surprising". Apart from this, worries about supply disruptions caused by Hurricane Milton in the US should limit losses for the black liquid.

Apart from this, subdued US Dollar (USD) price action might hold back bulls from placing fresh bets around the USD/CAD pair. The US Labor Department reported on Thursday that Initial Jobless Claims increased to 258K in the week ended October 5 and pointed to signs of weakness in the US labor market. This should allow the Federal Reserve (Fed) to continue cutting rates and keep the USD below its highest level since mid-August touched the previous day. 

That said, investors fully priced out the possibility of another oversized Fed rate cut in November in the wake of stronger-than-expected US consumer inflation figures. The headline Consumer Price Index (CPI) rose 2.4% in the 12 months to September, while the core gauge, which excludes food and energy prices, climbed 3.3%. The data fueled speculations about a slower pace of interest rate cuts by the Fed and acts as a tailwind for the Greenback.  

The mixed fundamental backdrop warrants some caution ahead of Friday's key macro data from the US and Canada. The US Producer Price Index (PPI) report will be released later during the early North American session, along with the monthly Canadian jobs report. Traders will further take cues from the Preliminary Michigan Consumer Sentiment Index and Inflation Expectations, and Fedspeak to grab short-term opportunities heading into the weekend. 

Technical Outlook

From a technical perspective, the Relative Strength Index (RSI) on the daily chart has moved on the verge of breaking into the overbought territory. This makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for the next leg up. Any meaningful corrective slide, however, is likely to find decent support near the 1.3700 mark, below which the USD/CAD pair could accelerate the fall towards the 1.3650-1.3645 region en route to the 1.3620 horizontal resistance breakpoint.  

The latter is closely followed by the 1.3600 round figure, which should now act as a key pivotal point. A convincing break below the said handle will suggest that the USD/CAD pair’s recent upward trajectory witnessed over the past three weeks or so has run its course and shift the bias in favor of bearish traders. 

On the flip side, the 1.3800 mark now seems to act as an immediate hurdle, above which the USD/CAD pair could climb further towards the next relevant resistance near the 1.3850 horizontal zone. Some follow-through buying should allow bulls to make a fresh attempt to conquer the 1.3900 mark and accelerate the momentum further towards the 1.3945 region, or a nearly two-year top touched in August.

USD/CAD daily chart