USD/CAD price remains near multi-year high as Canada faces political and economic challenges
USD/CAD climbs amid Canadian political uncertainty
The USD/CAD pair extended its rally for a fourth consecutive day, trading just above the mid-1.4200s, its highest level since April 2020. This upward momentum is driven by a combination of political turmoil in Canada and broader economic concerns.
The unexpected resignation of Canadian Finance Minister Chrystia Freeland has heightened political uncertainty, further weakening the Canadian Dollar (CAD).
USD/CAD chart (Nov 2024 - Dec 2024) Source: Trading View
Adding to the pressure, subdued crude oil prices have diminished support for the commodity-linked Loonie. Meanwhile, the Bank of Canada’s (BoC) dovish stance, coupled with aggressive monetary easing, has raised concerns about slowing economic growth in the final quarter of 2024.
US Dollar strength amid Fed expectations
On the U.S. side, the Dollar maintains strength due to elevated Treasury bond yields and persistent geopolitical tensions. Investors are cautiously awaiting the Federal Reserve’s policy decision following its two-day FOMC meeting on Wednesday. While traders expect the Fed to adopt a cautious stance on further rate cuts, the possibility of a policy shift remains a significant market driver.
The USD/CAD pair's bullish trend is further supported by technical indicators. Stochastic momentum signals suggest a continuation of the upward trajectory, with the next key resistance level projected at 1.4350. Breaking below 1.4205, however, could trigger a decline toward the 1.4100 support level before any new rally attempt.
We previously discussed USD/CAD’s rally driven by the BoC's easing measures and U.S. inflation data. These factors continue shaping the pair’s upward trend amid ongoing geopolitical and economic challenges.
