USD/CAD Price Analysis – Nov 05, 2024

Daily Price Outlook

During European trading hours on Tuesday, the USD/CAD currency pair continued its downward trend for the second consecutive session, hovering around 1.3880. However, the commodity-linked Canadian Dollar (CAD) is benefiting from steady oil prices as Canada is the largest oil exporter to the United States. Meanwhile, analysts expect the Bank of Canada (BoC) to implement a significant rate cut at its final monetary policy meeting of the year in December.

In contrast, the US Dollar is under pressure as the market anticipates the upcoming US elections. Hence, the USD/CAD pair is likely to weaken as the Canadian Dollar gains support from stable oil prices and anticipated rate cuts by the Bank of Canada, pressuring the US Dollar.

Therefore, the USD/CAD pair is likely to weaken as the CAD gains support from stable oil prices and anticipated rate cuts by the Bank of Canada. In contrast, the US Dollar faces downward pressure, further contributing to the pair's decline.

Impact of Oil Prices and Bank of Canada Decisions on USD/CAD Pair

As we mentioned, the Canadian Dollar is getting support from stable oil prices since Canada is the largest oil exporter to the United States. Currently, Oil prices are steady as traders remain cautious due to the uncertainties surrounding the results of the US presidential election taking place on Tuesday.

Looking ahead, the Bank of Canada (BoC) is expected to announce a significant rate cut at its final monetary policy meeting of the year in December. BoC Governor Tiff Macklem has hinted at the possibility of reducing rates by another 50 basis points (bps).

Traders will be closely watching Canada’s International Merchandise Trade data, which includes information on imports and exports, scheduled for release on Tuesday. Then, on Wednesday, the focus will shift to the BoC's Summary of Deliberations and the Ivey Purchasing Managers Index (PMI) data.

Therefore, the USD/CAD pair is likely to weaken as the Canadian Dollar gains strength from stable oil prices and anticipated rate cuts by the Bank of Canada. Meanwhile, uncertainty surrounding the US elections may put additional pressure on the US Dollar.

Impact of US Presidential Election Uncertainty on the USD/CAD Pair

On the US front, former President Donald Trump and Vice President Kamala Harris are both confident about their chances as they campaign across Pennsylvania on the last day of a very close presidential election. Current opinion polls show that Trump and Harris are almost tied, meaning the final winner may not be known for several days after the voting takes place on Tuesday.

As a result, the US Dollar is facing downward pressure despite the rising US Treasury yields. The yields on 2-year and 10-year US Treasury bonds are currently at 4.17% and 4.30%, respectively. T

Therefore, the uncertainty surrounding the US presidential election may exert downward pressure on the USD, potentially weakening the USD/CAD pair. However, stronger US Treasury yields could provide some support for the Dollar, mitigating losses against the Canadian Dollar amid stable oil prices.

USD/CAD – Technical Analysis

The USD/CAD pair is trading at $1.38862, down by 0.12% in the latest session, as it encounters downward pressure near key technical levels. Currently, the pair is testing a critical pivot at $1.39210, which defines its short-term direction.

The Relative Strength Index (RSI) stands at 36, edging towards the oversold zone, indicating that the bearish momentum may be close to exhaustion, though a further drop remains possible.

Immediate resistance is positioned at $1.39349, with further upside barriers at $1.39489. A push above these levels could shift sentiment to a more bullish outlook, targeting higher grounds. However, the 50-day Exponential Moving Average (EMA) at $1.39120 serves as a key point of overhead resistance, reinforcing a bearish bias below this level.

On the support side, the first major support lies at $1.38789, with additional safety nets at $1.38635 and $1.38447. Should USD/CAD break below the $1.38789 support level, it could accelerate selling pressure, possibly driving the pair lower.

For now, the market favors a bearish stance, with a recommended entry below $1.38931, targeting $1.38629 for profit-taking while setting a stop loss at $1.39140 to manage potential risks.

Overall, USD/CAD remains in a downtrend, with key levels to watch on both sides. A break below immediate support could further solidify the bearish trend, while any recovery above the 50 EMA may indicate a potential reversal.