FX.co ★ USD/CAD

The USD/CAD pair is holding steady above the mid-1.4250s during the Asian trading session on Monday amid a supportive technical and fundamental environment for the bulls, following their move to fresh highs last week. The bulls could extend their ongoing bullish trend seen over the last month or so in a strong bid to consolidate their grip on the price action. What initially appeared to be a strong forex market response to the disappointing US Nonfarm Payrolls (NFP) report released last Friday proved short-lived, as expectations of more rate hikes remain high, with an over 80% probability of Fed tightening monetary policy before the end of the year. In addition, ongoing geopolitical tensions from the Middle East and the Russia-Ukraine war have triggered a rally in the greenback as a safe-haven currency. Regarding the latest news, the head of the Yemeni government, Rashad al-Alimi, stated that military operations against the Houthis have begun. In addition, the foreign minister of Iran, Abbas Araghchi, mentioned that there is no military solution to the conflict with America; however, Iran is ready to return to war. Also, the speaker of the Iranian parliament, Mohammad Bagher Ghalibaf, said the Strait of Hormuz will not be opened until Iran's conditions are met. Speaking of other news, the Russian military strikes on the Kyiv region, Kharkiv, and Dnipro were announced by Ukraine. In this case, Ukrainian President Volodymyr Zelenskyy noted on X that Russia would definitely get a response, which adds a geopolitical risk premium to the USD/CAD pair. Meanwhile, the weaker tone around crude oil prices weighs on the Canadian dollar, adding to the list of supporting factors for the USD/CAD pair. The Canadian Dollar (CAD) may also struggle to recover from its weak performance, as the Bank of Canada (BoC) continues to pursue a dovish policy and tensions remain between the two countries over trade relations. This suggests the path of least resistance for this currency pair still points higher, despite overbought conditions on the short-term chart discouraging investors from going long on USD/CAD. Technically, the break above the previously established yearly highs at 1.4245-1.4250 last week is the latest stimulus reinforcing the prospect of a run back toward 1.4300. On the other hand, a retracement from here will likely meet solid resistance at Friday's swing low near 1.4200. Below this level, we may see some technical selling, sending the pair down to the 1.4150-1.4145 area.