FX.co ★ USD/CAD

USD/CAD stabilizes after rising for three consecutive days, quoting at 1.4104 near the Asian session on Thursday. USD/CAD is nearly unchanged as the resource-based Canadian Dollar remains range-bound amid caution over oil prices, which could rise amid uncertainty over ongoing talks between the United States and Iran. The president of Iran, Masoud Pezeshkian, while addressing the UN General Assembly, asserted that Iran will not bow down to any intimidation and that Iran has the right to develop nuclear technology to boost its economy. Moreover, Iran will curb navigation through the strategic Strait of Hormuz until US sanctions and blockades are in place. Strategists at Scotiabank warn of a difficult environment for the Canadian Dollar, stressing that "wide spreads are the most important factor hurting the fundamentals of the CAD." At the same time, "the negative CAD seasonality in Q4 also implies that there is a threat of higher headwinds to the CAD going forward," thus confirming the opinion of the currency's weak performance amid the approaching end of the year. But USD/CAD could find more strength because of the supportive effect on the US Dollar (USD), driven by a hawkish Fed and strong economic data. This was confirmed by the recent September Flash US S&P Global PMI, where manufacturing increased faster than expected at 52.0. In line with US economic indicators, market expectations for a 0.25% interest rate increase by the Federal Reserve in October jumped to almost 69.7%, up from 48.7% last week. Investors are shifting focus to weekly US Initial Jobless Claims data. Meanwhile, Federal Reserve officials reiterated their stance on recent rate hikes. The Fed has been quite hawkish today, with an FXS Speechtracker rating of 8 out of 10 compared with a historical rating of 7 out of 10, indicating a more hawkish bias. "Further rate hikes likely needed to ensure timely return to 2% inflation," along with the acknowledgment of higher risks to inflation and lower risks to the labor market, shows a preference for further policy tightening despite robust growth and a strong labor market. Saying that "the Fed was out of position and needed to recalibrate policy" confirms the idea that current policy bias is too loose, which is dollar-friendly and risk-unfriendly. The FXS Fed Sentiment Index gained 0.42 points to 148.81, remaining clearly hawkish and in line with the high FXS Speechtracker level. This development strengthens the perception that the Fed is leaning toward further tightening, which will help the Dollar maintain strength versus low-yield currencies. In the current trading period, the USD/CAD is trading at 1.4100 on the daily timeframe. The pair trades above the nine-period and 50-period EMAs, indicating a constructive bullish bias in the short term. That said, this positive bias is supported by trend lines indicating short- and medium-term positive trends in favor of the asset. The 14-day RSI is at 69.74 and near overbought conditions. This means that while upside momentum remains strong, we can expect periodic retracements or temporary reversals caused by consolidations. The nearest support level is 1.4017, which corresponds to the nine-period EMA. A little lower, the 50-period EMA is at 1.3946, indicating another support level where buying pressure may form. As long as the price continues to trade above these levels, there is no reason to think about any decline. In turn, given the RSI's overbought condition, we can assume upside moves will slow for now.