USD/CAD eases as the US Dollar declined following President Trump’s announcement that immediate military strikes against Iran are not on the table, which has reduced the demand for safe-haven assets. The Canadian Dollar may face challenges as the easing of tensions in the Middle East exerts downward pressure on crude oil prices. Markets are currently reflecting a 90.6% probability that the Federal Reserve will maintain its interest rates during the meeting scheduled for October 27-28. USD/CAD has experienced a depreciation following its bullish gap opening, currently trading near the 1.4000 mark during the Asian session on Monday. The pair loses ground as the US Dollar declines amid easing safe-haven demand, driven by US President Donald Trump ruling out immediate military action against Iran, stating, “there will not be a strike today,” according to reports.
However, President Trump’s remarks alleviated the upward pressure on oil prices, which may exert downward pressure on the commodity-linked Canadian Dollar and restrict the downside potential of the USD/CAD pair. Analysts emphasise that domestic demand continues to face challenges, pointing out that “housing markets remain weak” as the late-summer data period approaches. They add that the August gross domestic product figures due next Friday “should confirm that growth slowed in Q3 after surging in Q2,” reinforcing their view that the economy has shifted down a gear following the earlier burst of activity. Market participants are now focusing on the imminent policy decision from the Federal Reserve. The Fed is anticipated to maintain interest rates at their current levels prior to possibly considering an additional rate increase in December.
According to the CME FedWatch Tool, markets are currently pricing in a 90.6% probability of a rate pause at the October 27-28 policy meeting, alongside a 79.7% chance of a hike in December. Strategists note that safe-haven flows are becoming more fragmented within the G10 complex, as various shocks are influencing demand for distinct currencies. They observe that “AI jitters favour JPY, Middle East tensions support CAD and NOK, while French fiscal stress benefits CHF,” highlighting how concerns related to technological growth, regional geopolitical risks, and specific fiscal issues are influencing various areas of defensive positioning in the foreign exchange market. In the daily chart, USD/CAD is positioned at 1.4000, maintaining a bearish near-term outlook as it remains below both the nine- and 50-period Exponential Moving Averages.
The pair has retreated from recent highs and remains constrained by this short-term EMA cluster, while the 14-day Relative Strength Index at 37 indicates a tendency toward the oversold territory, implying a deterioration in bullish momentum rather than a clear reversal. On the topside, immediate resistance is positioned at the 50-period EMA at 1.4067, closely followed by the nine-period EMA at 1.4073, with a more substantial barrier at the horizontal level near 1.4300. On the downside, initial support is observed at 1.3732, followed by a more distant structural floor at 1.3482. A sustained break below these levels would signal the potential for a deeper corrective phase.
