FX.co ★ USD/CAD

USD/CAD sees some dips bought into at the start of the week after a slight pullback on Friday from levels above the psychologically important 1.4000 level, the highest since August 7. Furthermore, the bullish fundamentals support the idea of a further continuation of a near two-week-old trend. Oil prices fell to over one-week lows as shipments from Saudi Arabia recovered and supply concerns eased. In addition, widening interest rate differentials between the US and Canada, along with US-Canada trade disputes, have weighed on the Canadian Dollar (CAD). The Bank of Canada (BoC) left the key policy interest rate unchanged at 2.25%, while the US Federal Reserve (Fed) raised rates for the first time in more than three years last Wednesday. Regarding the trade aspect, the United States slapped punitive tariffs of 50% on Canadian goods estimated at around $20 billion on August 22. Canada, in retaliation, levied punitive tariffs between 15% and 50% on goods from the United States estimated at around $20 billion on September 8. Aside from that, a fundamentally bullish USD, backed by a hawkish Fed and rising tensions in the Middle East, is somewhat supportive of the USD/CAD currency pair. In contrast, the famous “dot plot” showed that Fed policymakers see at least one more rate hike this year. On top of that, Iran has set down seven preconditions for negotiating with America. Furthermore, the Houthi militia of Iran in Yemen confirmed that they attacked strategic targets in the Saudi Arabian capital of Riyadh using missiles and drones. This suggests the geopolitical risk premium will continue to play a role and benefit bears, indicating that a downward CAD trend is likely. Furthermore, price has already climbed to the 50% retracement level at 1.3992, indicating that bulls are still controlling the price action. In terms of future levels, the next key area of resistance could be seen near the 61.8% Fibonacci retracement level at 1.4052, with further resistance seen near the 78.6% retracement level at 1.4137 and also near the swing high at 1.4246. On the other hand, key short-term support comes from the 50% retracement at 1.3992, followed by the 38.2% retracement at 1.3932 and the 100-day EMA at 1.3924. The next major support level in a decline will be the 23.6% retracement at 1.3858, followed by the structure level at 1.3738.