USD/CAD declined even as easing tensions in the Middle East exerted pressure on oil prices and the Canadian Dollar. The US Dollar faces challenges as the demand for safe-haven assets diminishes, attributed to a reduction in tensions in the Middle East. Robust US GDP and labour statistics constrain more significant declines in the USD, even in the face of diminishing probabilities for Federal Reserve rate hikes. USD/CAD experiences a decline for the third consecutive day, currently trading near 1.3970 during the Asian session on Friday. The pair depreciates despite renewed Middle East diplomatic efforts that ease pressure on oil markets, exerting downward pressure on the commodity-linked Canadian Dollar.
Crude oil prices remained stable after a report indicated that US Vise President JD Vance contacted Mohsen Rezaei, Secretary of Iran’s Supreme National Security Council, on Wednesday to initiate discussions aimed at resuming peace talks. US President Donald Trump confirmed his approval of Vance’s diplomatic outreach, noting that Iran requires assistance with medical supplies and other essential resources. The US Dollar faces pressure on easing safe-haven demand amid hopes for US-led diplomatic peace talks. Easing tensions in the Middle East have contributed to alleviating concerns regarding oil supply and inflation, thereby reducing the likelihood of a Federal Reserve rate hike during its December meeting. Traders are currently assigning a probability of approximately 75% to a 25-basis-point rate increase, a decrease from the 84.2% observed the previous day.
However, recent US economic data underscores ongoing resilience and heightened expectations for Fed rate hikes. Preliminary Gross Domestic Product registered at 3.4% YoY, surpassing expectations of 3.2% and increasing from Q2’s 2.2% figure, propelled by robust consumer spending at 3.8% YoY. Furthermore, the Fed’s preferred inflation metric, the Core PCE Price Index, rose 3.1% YoY in line with expectations, while initial jobless claims dipped slightly to 194K, reinforcing signs of a heating economy and a tight labour market. In the daily chart, USD/CAD is positioned at 1.3970, exhibiting a bearish near-term bias as it stays beneath the nine- and 50-day Exponential Moving Averages. The pair has retreated from recent highs and now trades under this short-term and medium-term moving average cluster, suggesting that upside is currently limited. Meanwhile, the 14-day Relative Strength Index at 36 indicates weak momentum rather than outright oversold conditions.
On the topside, immediate resistance is identified at the nine-day EMA at 1.4027, followed by the fifty-day EMA at 1.4057, with a more substantial barrier at the horizontal level near 1.4300. On the downside, initial support is observed at the 1.3732 horizontal floor, followed by a more significant structural level at 1.3482, where it is anticipated that buyers will exhibit greater interest should the current decline continue. Strategists note that the Bank of Canada’s mid-week move was not only about the decision itself but also about the tone accompanying it. They highlight that the BoC’s hike on Wednesday was “delivered with a modestly hawkish message” which, in their view, “ultimately delivered a slight boost in rate expectations across the curve,” reinforcing support for the Canadian Dollar against its commodity peers.
