Canadian Dollar hangs near one-month low, around 1.4250 as USD bulls await US PPI

The USD/CAD pair is seen consolidating its strong gains registered over the past week or so, trading near a one-month top, around mid-1.4200s during the first half of the European session on Friday.

The US Dollar (USD) ticks lower as bulls pause for a breather following a strong three-day rally to the highest level since April 2025. Adding to this, a modest uptick in crude oil prices seems to underpin the commodity-linked Loonie, which contributes to keeping a lid on the USD/CAD pair. However, a combination of factors should continue to act as a tailwind for the Greenback and help limit the downside for the currency pair.

Against the backdrop of hotter-than-expected US October consumer inflation figures, hawkish commentary from several Federal Reserve (Fed) officials prompted traders to price in a tighter monetary policy stance. In fact, a 25-basis-points (bps) rate increase in December is fully priced in, and traders are assigning around a 13% chance of a jumbo 50-bps hike next month. This, along with Middle East uncertainties, favors USD bulls.

In the latest developments, US President Donald Trump on Thursday issued a fresh warning to Iran, saying that those responsible for any attack on American officials would no longer exist. Trump added that he would not hesitate to launch further military action if the situation warranted it. Moreover, Trump wrote in a Truth Social post that the US does not need a deal with Iran, adding that those days have long since passed.

Moreover, continued attacks on Saudi Arabia's energy infrastructure and commercial ships in the Strait of Hormuz keep the geopolitical risk premium in play, supporting crude oil prices and the safe-haven Greenback. Traders now look forward to the US Producer Price Index (PPI), which, along with speeches from influential FOMC members, would drive USD demand and provide some impetus to the USD/CAD pair.

Dollar rally builds as Fed hike expectations firm on hot us inflation

Analysts at ING highlight that “this week has seen a powerful, macro-driven rally in the Dollar,” with short-dated US yields now “close to 40bp higher since Tuesday morning, when the Fed's Christopher Waller mused over the need for a 50bp hike in December.” They note that the market has “since adopted the view that back-to-back December and January hikes look likely, while extending the full Fed adjustment from here to a full 85bp of tightening.”

Looking ahead, ING argues that the October US PPI “looks likely to keep the narrative of hot US inflation alive.” They expect close “scrutiny into the components of PPI, such as healthcare, airfares and software, that feed into the Fed's preferred PCE inflation data – the next release of which is on 25 November.” ING adds that, “were that core PCE to rise 0.3% month-on-month for the third month in a row, expectations of a 50bp December hike would grow,” reinforcing the recent repricing at the front end of the US curve.

USD/CAD daily chart

Technical Analysis

The USD/CAD pair holds well above the 200-period Exponential Moving Average (EMA) at 1.3968 and retains a bullish near-term bias. However, some follow-through buying beyond the previous year-to-date high, around the 1.4300 mark, is needed to back the case for further gains.

On the downside, any pullback below the 1.4200 immediate support is more likely to be bought into and remain limited near the 1.4125 region. This is followed by the 1.4100 mark, below which the USD/CAD pair could test the 200-day EMA near 1.3968. As long as spot prices defend this moving-average floor, the technical structure hints that any corrective slides are likely to be contained before a deeper bearish phase can develop.

(The technical analysis of this story was written with the help of an AI tool. Know more.)