USD/CAD price struggles to extend gains amid crude oil volatility
Canadian dollar pressured by oil price consolidation and geopolitical tensions, impacting USD/CAD outlook
USD/CAD price is facing challenges in extending its recent gains despite a steady uptrend earlier this week. After rebounding from the upward trendline at 1.4010 in Tuesday’s European session, the pair surged to 1.4080 in today’s session.
However, with the price now hovering near key support levels, the bullish momentum seems to be losing steam.
USD/CAD price dynamics (November-December 2024). Source: TradingView.
The recent consolidation in crude oil prices, following strong gains from the previous day, is putting pressure on the Canadian Dollar. OPEC+ is expected to announce an extension of supply cuts on Thursday, a move that should provide support to oil prices, and by extension, the commodity-linked Loonie. In addition, Israel's threat to attack Lebanon if its truce with Hezbollah collapses is likely to add geopolitical tension, which has historically buoyed crude oil prices. Together, these factors create a headwind for USD/CAD, as traders seem to favour the Loonie over the greenback amid reduced expectations for a larger rate cut by the Bank of Canada (BoC) in December.
NFP and Fed chair Powell speech to shape USD/CAD price outlook
On the US Dollar side, the greenback is struggling to gain traction. Market participants are cautious ahead of Federal Reserve (Fed) Chair Jerome Powell’s speech, with traders reluctant to place aggressive bets. Additionally, expectations that the Fed will maintain a cautious stance on rate cuts, particularly with concerns about inflation driven by President Trump’s policies, are weighing on the US dollar.
Looking ahead, traders will focus on the upcoming US Nonfarm Payrolls (NFP) report, which could provide new insights into the Fed’s rate path and influence USD price dynamics. A further dip in USD/CAD below 1.4055 could find support from the 200 EMA on the 1-hour chart, potentially limiting the downside and setting up for a retest of 1.4090. While the pair remains above support, external factors like crude oil price dynamics, the Fed’s stance on rates, and upcoming economic data could shape the next moves.
Outlook for USD/CAD seems tilted to the upside as price faces uncertainty. Thanksgiving holiday in the US caused low trading volumes and dampened market activity.
