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Canadian Dollar slumps to its lowest level since July 9, eyes 1.4200 vs bullish USD

  • USD/CAD attracts buyers for the seventh consecutive day amid a combination of supporting factors.
  • The USD sits near a two-month top amid Fed hike bets, surging US bond yields and geopolitical risks.
  • Hopes for Iran diplomacy cap crude oil prices, undermining the Loonie amid the BoC’s dovish outlook.

The USD/CAD pair prolongs a three-week-old upward trajectory, rising to its highest level since July 9 and closer to the 1.4200 mark during the Asian session on Tuesday amid a bullish US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, stands firm near a two-month high in the wake of the Federal Reserve's (Fed) hawkish outlook. In fact, the US central bank projected another rate increase by the end of this year after delivering the widely expected 25 basis points (bps) hike for the first time in over three years earlier this month. Moreover, energy-driven inflation fears underpin prospects for additional tightening, which continues to push US bond yields to multi-year highs and underpins the buck.

Adding to this, persistent geopolitical uncertainties stemming from the US-Iran standoff benefit the safe-haven USD and act as a tailwind for the USD/CAD pair. In the latest developments surrounding the Middle East crisis, US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz immediately on meeting their terms and end fighting. However, media reports suggested that Trump was ready to ease sanctions on Iran and release its frozen assets in exchange for concrete progress on the country's nuclear program.

This caps the upside for crude oil prices, which, along with the Bank of Canada's (BoC) predominantly dovish policy outlook and US-Canada trade tensions, weighs on the commodity-linked Loonie and turns out to be another factor supporting the USD/CAD pair. The fundamental backdrop, in turn, suggests that the path of least resistance for spot prices remains to the upside. Bulls, however, might opt to wait for this week's release of the US Personal Consumption Expenditures (PCE) Price Index and the US Nonfarm Payrolls (NFP) report.

USD/CAD daily chart

Chart Analysis USD/CAD

Technical Analysis

The USD/CAD pair extends its advance after reclaiming a series of Fibonacci retracement levels clustered between the 61.8% mark at 1.4049 and the 78.6% mark at 1.4137. Moreover, spot prices hold firmly above the 100-day Simple Moving Average (SMA) at 1.3977, which reinforces a bullish near-term bias and a further move up to the cycle high at 1.4248. This could cap the current bullish phase and defines the immediate resistance for further gains.

On the downside, initial support is located at the 78.6% retracement at 1.4137, followed by the 61.8% level at 1.4049 and the 50% retracement at 1.3988. The latter converge around the 100-day SMA at 1.3977 to form a broader demand zone. However, deeper pullbacks would expose the 38.2% retracement at 1.3926 and the 23.6% level at 1.3850 ahead of the structural anchor near 1.3727.

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

US Dollar Price This Month

The table below shows the percentage change of US Dollar (USD) against listed major currencies this month. US Dollar was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD2.20%2.27%-1.53%2.35%2.19%4.50%2.94%
EUR-2.20%0.08%-3.67%0.14%-0.01%2.25%0.73%
GBP-2.27%-0.08%-3.75%0.07%-0.09%2.18%0.67%
JPY1.53%3.67%3.75%3.95%3.80%6.08%4.63%
CAD-2.35%-0.14%-0.07%-3.95%-0.14%2.05%0.58%
AUD-2.19%0.00%0.09%-3.80%0.14%2.26%0.76%
NZD-4.50%-2.25%-2.18%-6.08%-2.05%-2.26%-1.50%
CHF-2.94%-0.73%-0.67%-4.63%-0.58%-0.76%1.50%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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