CFD Trading Rate US Dollar vs Canadian Dollar (USDCAD)

The Canadian Dollar (CAD) has slipped back somewhat after gains met resistance in the mid-1.3950 area, as expected, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

CAD rebound stalls around 1.3950

“The marginally hotter than expected CPI data for Canada yesterday should tilt risks a bit more squarely towards a 25bps cut from the BoC next month. But rates traders are not easily persuaded. Swaps are little changed from pre-CPI indications, pricing in around 33bps of cuts for next month—about 30% risk of a 50bps move in effect.”

“Wide short-term spreads still represent a significant headwind for the CAD. Spot fair value is estimated at 1.4015 this morning. The USD’s positive reaction to the test of support at 1.3950 suggests a minor low at least is in for spot. Price action is mildly USD positive on the short-term charts on the session and the rebound sustains the broader uptrend in funds in place since late September.”

“The minor dip in the USD has relieved short-term overbought conditions a little—but just enough to facilitate a renewed push higher. Resistance is 1.4040 and 1.41.”

• The USD/CAD faces an immediate barrier at the nine-day EMA of 1.3979 level.
• The nine-day EMA is above the 14-day EMA, signifying ongoing strength in short-term price momentum.
• The pair finds support around the 14-day EMA at the 1.3958 level, followed by the psychological 1.3950 level.

The USD/CAD pair holds ground after two days of losses, trading around 1.3970 during the European hours on Wednesday. The daily chart analysis indicates that the pair is trending upwards within an ascending channel pattern, suggesting a bullish bias.

The 14-day Relative Strength Index (RSI) is above the 50 level, confirming continued bullish momentum. Additionally, the nine-day Exponential Moving Average (EMA) is positioned above the 14-day EMA, indicating persistent strength in short-term price momentum.

On the upside, the USD/CAD pair faces an immediate resistance at the nine-day EMA of 1.3979 level. If the pair breaks above this level, it may move toward the region around the upper boundary of the ascending channel at the 1.4130 level. A breakout above this channel could reinforce the bullish bias and drive the pair toward the next key resistance level of 1.4173, last seen in May 2020.

Regarding support, the USD/CAD pair could test the immediate 14-day EMA at the 1.3957 level. A break below this level could weaken the bullish bias, putting downward pressure on the pair to test the lower boundary of the ascending channel at the 1.3920 level.

USD/CAD: Daily Chart

• USD/CAD consolidates in a range near a one-week low amid mixed fundamental cues.
• Hotter Canadian CPI tempers bets for a bigger BoC rate cut and underpins the CAD.
• Rebounding US bond yields revive USD demand and offer some support to the pair.

The USD/CAD pair finds some support near the mid-1.3900s, or a one-week low touched during the Asian session on Wednesday and for now, seems to have stalled this week's retracement slide from the highest level since May 2020. Spot prices, however, struggle to gain any meaningful traction, warranting some caution for bullish traders amid mixed fundamental cues.

Data published on Tuesday showed that Canada's annual inflation rate rose more than expected, to 2.0% in October and forced investors to scale back their bets for a big rate cut by the Bank of Canada (BoC) in December. This, in turn, is seen offering some support to the Canadian Dollar (CAD) and acting as a headwind for the USD/CAD pair. That said, subdued Crude Oil prices keep a lid on any meaningful appreciation for the commodity-linked Loonie.

Despite the prospect of supply disruptions from an escalation in the Russia-Ukraine conflict, signs of a build in US stockpiles fail to assist Crude Oil prices to build on a two-day-old recovery from over a two-month low touched on Monday. In fact, the American Petroleum Institute (API) reported that US inventories grew much more than expected, by 4.75 million barrels in the week to November 15, pointing to increased supply in the world’s biggest oil producer.

Apart from this, the emergence of some US Dollar (USD) dip-buying should limit any meaningful downside for the USD/CAD pair. Investors now seem convinced that US President-elect Donald Trump's policies will spur economic growth and rekindle inflationary pressures. This could restrict the Federal Reserve (Fed) from cutting interest rates, which, in turn, triggers a fresh leg up in the US Treasury bond yields and helps revive the USD demand. 

Moving ahead, investors now look forward to speeches by influential FOMC members for cues about the future rate-cut path. This will play a key role in driving the US bond yields and the USD later during the North American session. Furthermore, traders will take cues from the official US Oil inventory data, which should influence the black liquid and contribute to producing short-term trading opportunities around the USD/CAD pair.

• USD/CAD trades with mild negative bias near 1.3955 in Wednesday’s early Asian session. 
• The geopolitical risks might boost the safe-have currency like the USD. 
• Canada's CPI inflation jumps to 2.0% in October from 1.6% in September. 

The USD/CAD pair trades with mild losses around 1.3955 during the early Asian session on Wednesday. The hotter-than-expected Canadian inflation report for October supports the Canadian Dollar (CAD) against the Greenback. However, the renewed geopolitical tensions between Russia and Ukraine might cap the pair’s downside.

Reuters reported late Tuesday that Ukraine used US ATACMS to strike Russian territory for the first time, marking a significant uptick in hostilities on the 1,000th day of the conflict. The immediate reaction in markets faded when Russian Foreign Minister Sergei Lavrov said that the government would "do everything possible" to avoid the onset of nuclear war. The US said that it had not adjusted its nuclear posture in response. Investors will closely monitor the developments surrounding the geopolitical risks. Any signs of escalation could boost the safe-haven flows, benefiting the Greenback. 

On the Loonie front, traders trim their bets on a jumbo rate cut by the Bank of Canada (BoC) in December after Canada's annual inflation rate rose more than expected in October. Data released by Statistics Canada on Tuesday showed that the country’s Consumer Price Index (CPI) rose by 2.0% YoY in October, compared to a 1.6% gain in September, hotter than the market expectations of a 1.9% increase. On a monthly basis, the CPI increased by 0.4% versus -0.4% prior and above the market consensus of 0.3%. 

The markets are now pricing in nearly 26% odds of a 50 basis point (bps) rate cut by the BoC next month, down from 37% before the CPI data release. Traders will take more cues from the Canadian Gross Domestic Product (GDP) data next week and employment data early next month, which might influence the BoC’s decision on the size of the rate reduction.

USD/CAD has reached our end of year target of 1.40 and we fully expect the pair to reach the 1.42 level we highlighted for Q1, Rabobank’s FX analysts Molly Schwartz and Christian Lawrence note.

USD/CAD likely to reach 1.46 next year

“That said, given two main drivers we outline below, we now expect further extension to the upside with USD/CAD likely to reach 1.46 next year, just shy of the highs from 2016 and 2020.We have seen a decrease in USD/CAD correlations of late but fully expect a resumption of interest rate differential driven moves in 2025.”

“Our proprietary FX 1m vol index spiked on November 5th up to a high of 8.27%, and has since depressed to 6.92%. USD/CAD 1m implied volatility has moved in kind, spiking on November 5th, peaking at 6.22%. Vols have declined since that juncture, down to 5.81%.”

“We expect a further widening of US-CA rate differentials will be the primary driver of further upside for USD/CAD deep into 2025. Non-commercial speculators have been net short CAD since August of 2023. Net shorts are currently sitting at -182,389, 3.26 standard deviations below the 5yr average (-22,041).”

The Canadian Dollar (CAD) had a mildly better day yesterday to advance to the low 1.40s after peaking just above 1.41. Spot is little changed on the session so far today, despite the drop in global stocks, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD little changed on the day

“Spreads are narrowing somewhat from the early November peak, allowing for some consolidation in the CAD’s recent losses—and a moderate improvement in the CAD’s estimated fair value (1.4054 today). The CAD might be able to steady in the short run but the scope for significant gains remains limited. Canadian inflation data this morning is expected to reflect a pause in the recent trend of improvement in price data.”

“The street is looking for a 0.3% increase in the October month (Scotia anticipates slightly warmer price growth of 0.4%) and a 1.9% rise in the year (up from September’s 1.6%). Core prices are expected to come in at 2.4% for the Median and Trim measures (up a little and unchanged respectively from September). Slightly firmer inflation data may see Dec swaps pare back a little of the 35bps of easing priced in for next month’s BoC decision.”

“The CAD had a technically positive session overall yesterday, with funds forming a bearish engulfing line on the daily chart. With oscillators flashing “overbought” on a few fronts, price action would typically boost chances of a correction in USD strength. But the underlying trend higher in the USD remains strong and there has been no desire to push the USD any lower over the course of the session so far. I still rather think the USD is likely to find firm support on dips to the 1.3950/00 zone with a push under 1.3945/50 really needed to boost the CAD.”

• USD/CAD drops sharply below 1.4000 as Canadian inflation grew faster than expected in October.
• Higher-than-expected US inflation data might weigh on BoC large rate cuts prospects for December.
• The US Dollar falls back despite dismal market sentiment amid geopolitical tensions.

The USD/CAD pair falls sharply after the release of the hotter-than-expected Canadian Consumer Price Index (CPI) report for October. The CPI report showed that the headline inflation accelerated to 2%, faster than expectations of 1.9% and from 1.6% in September on year. Month-on-month headline inflation rose by 0.4%, the same pace at which price pressures decelerated in the previous month. Economists expected the monthly headline CPI to grow by 0.3%.

Faster-than-expected growth in inflationary pressures would weigh on market expectations for a second consecutive larger-than-usual interest rate cut of 50 basis points (bps) by the Bank of Canada (BoC) in the December meeting. However, the BoC might continue its policy-easing spell as the central bank is worried about a higher jobless rate. Canada’s Unemployment Rate was recorded at 6.5% in October, much higher than what is needed to maintain a full employment environment.

Meanwhile, dismal market sentiment due to a fresh escalation in the Russia-Ukraine war has strengthened the appeal of safe-haven assets. S&P 500 futures have posted significant losses in the North American session.

The war situation between Russia and Ukraine renewed after President Vladimir Putin’s approval of updating the nuclear doctrine, a move followed by the launch of United States (US) made and supplied ballistic missiles by Ukraine deep in their territory.

Moscow warned that the approval of US President Joe Biden for launching long-range missiles in the Russian region is unacceptable and could lead to a third world war.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls back after failing to extend recovery above the key resistance of 106.70. Going forward, the US Dollar (USD) will be influenced by market expectations for the Federal Reserve’s (Fed) monetary policy action in the December meeting. Trades are slightly confident that the Fed will cut interest rates by 25 bps to 4.25%-4.50% next month, according to the CME FedWatch tool.

• USD/CAD holds above 1.4000 and draws support from a combination of factors.
• Bearish Crude Oil prices undermine the Loonie and act as a tailwind for the pair.
• The emergence of fresh USD buying favors bulls ahead of the Canadian CPI print.

The USD/CAD pair finds some support near the 1.4000 psychological mark on Tuesday and for now, seems to have stalled its retracement slide from the highest level since May 2020. Traders, however, remain on the sidelines and keenly await the release of Canadian consumer inflation figures before placing fresh directional bets.

The headline Canadian Consumer Price Index (CPI) is estimated to rise by 0.3% in October and the yearly rate is anticipated to have increased from 1.6% in September to 1.9%. A softer-than-expected reading will reinforce market bets for another jumbo interest rate cut by the Bank of Canada (BoC) in December. This, in turn, might continue to weigh on the Canadian Dollar (CAD) and assist the USD/CAD pair to resume its recent well-established uptrend witnessed over the past two months or so.

Heading into the key data risk, signs that supply tightness was easing keep a lid on the overnight recovery in Crude Oil prices from over a two-month low and undermine the commodity-linked Loonie. Furthermore, expectations that US President-elect Donald Trump's policies will boost inflation and limit the scope for further interest rate cuts by the Federal Reserve (Fed) revive the US Dollar (USD) demand. These turn out to be key factors acting as a tailwind for the USD/CAD pair. 

Meanwhile, the aforementioned fundamental backdrop favors the USD bulls and suggests that the path of least resistance for the currency pair remains to the upside. Hence, any immediate market reaction to strong Canadian CPI print might still be seen as a buying opportunity and is more likely to be short-lived. Bullish traders, however, need to wait for sustained strength and acceptance above the 1.4100 mark before placing fresh bets and positioning for any further appreciating move.

• USD/CAD gains ground to around 1.4020 in Tuesday’s Asian session.
• The rising geopolitical risks support the USD. 
• The Canadian CPI inflation report will be in the spotlight on Tuesday. 

The USD/CAD pair trades in positive territory near 1.4020 on Tuesday during the Asian trading hours. The resurgence of geopolitical tensions in the Middle East and in the Russia-Ukraine front boost the safe-haven currency like the Greenback. Investors will closely watch Canada’s Consumer Price Index (CPI) inflation data, which is due later on Tuesday.

Citing two US officials familiar with the decision, CNN News reported on Sunday that US President Joe Biden's administration has authorized Ukraine to use US arms to strike inside Russia in a significant reversal of Washington's policy in the Ukraine-Russia conflict. Investors will monitor the development surrounding geopolitical risks. Any signs of escalation could lift the US Dollar (USD) against the Loonie. 

Additionally, markets expect that Donald Trump’s administration will reignite inflation and slow the path of rate cuts from the Federal Reserve (Fed). This, in turn, contributes to the USD’s upside. Futures markets hint at 58.7% odds of a Fed rate cut in December, though expectations for rate cuts through 2025 have moderated to 77 basis points (bps).

On the Loonie front, the Canadian CPI inflation is expected to rise to 1.9% YoY in October from 1.6% in the previous reading, while the monthly CPI is estimated to show an increase of 0.3%. Any signs of hotter inflation in the Canadian economy could lift the Canadian Dollar (CAD) and act as a headwind for USD/CAD. 

The Canadian Dollar (CAD) is little changed to start the week. There is no incentive to push the CAD higher at this point while yield differentials remain so favourable for the USD so stability or, more likely, more CAD softness are the only alternatives for spot trends in the short run, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD steadies while spreads remain wide

“Spot is sitting close to estimated fair value today (1.4122). Note that BoC rate cuts have rekindled the domestic housing market. October home sales rose 7.7% over September to reach the highest level in more than two years.”

“USD/CAD is consolidating just below 1.41. Price trends remain broadly USD-bullish following last week’s strong close. There are no signs on the short– or longer-term charts that the USD rally is poised to reverse at this point and while oscillator signals are still extending deeper into overbought levels, these conditions can persist for extended periods of time.”

“Minor dips will remain wellsupported. Key support is 1.3945/50. Longer run trends are leaning towards a retest of the 2020 high just under 1.47.”

• USD/CAD stays firm near 1.4100 as the US Dollar performs strongly across the board.
• Fed Powell doesn’t see any urgency for lowering interest rates aggressively.
• Traders await Canadian inflation data for fresh BoC interest rate cues.

The USD/CAD pair holds into gains near a fresh more than four-year high around 1.4100 in Monday’s European session. The Loonie pair strives to maintain its winning spell for the seventh trading day on Monday on multiple tailwinds: strength in the US Dollar (USD) across the board on likely acceleration in the United States (US) inflation due to President-elected Donald Trump’s victory in both houses and weakness in the Canadian Dollar (CAD) on increasing Bank of Canada (BoC) dovish bets.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near a fresh yearly high of 107.00. Market sentiment is slightly cautious as investors expect the Federal Reserve (Fed) to follow a more gradual policy-easing approach. S&P 500 futures trade cautiously during European trading hours.

On Thursday, Fed Chair Jerome Powell pushed back expectations of aggressive interest rate cuts but affirmed that the policy-easing cycle is intact, with inflation remaining on a sustainable track toward the bank’s target of 2%.

"The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said and added, “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully."

Meanwhile, the CAD remains on the backfoot as trades expect the BoC to cut interest rates again by 50 basis points (bps) in the December meeting. For more interest rate cues, investors await the Canadian Consumer Price Index (CPI) data for October, which will be published on Tuesday. Statistics Canada is expected to show that month-on-month headline CPI rose by 0.3% after a 0.4% deflation in September. On year, the inflation data is expected to have grown by 1.9%, faster than the former reading of 1.6%.

• USD/CAD grapples to extend its winning streak for the seventh consecutive session on Monday.
• The US Dollar’s strength is bolstered by recent hawkish remarks from Federal Reserve Fed officials.
• The commodity-linked CAD may receive support from positive sentiment surrounding Oil prices amid escalated concerns over possible supply disruptions.

USD/CAD trades around 1.4090 during the Asian hours on Monday, holding its ground near the four-year high of 1.4105, which was reached on Friday. The upside of the loonie pair is attributed to a stronger US Dollar (USD), driven by recent hawkish remarks from Federal Reserve (Fed) officials.

Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, highlighting the economy's resilience, robust labor market, and persistent inflationary pressures. Powell remarked, "The economy is not sending any signals that we need to be in a hurry to lower rates."

Moreover, on Friday, Federal Reserve Bank of Chicago President Austan Goolsbee emphasized the importance of the Fed adopting a cautious, gradual approach in moving toward the neutral rate. Meanwhile, Boston Fed President Susan Collins tempered expectations for continued rate cuts in the near term while maintaining market confidence in a potential rate reduction in December.

The USD/CAD pair may break its six-day winning streak as the commodity-linked Canadian Dollar (CAD) could strengthen, buoyed by positive sentiment surrounding Oil prices. This optimism is driven by heightened concerns over potential supply disruptions amid the escalating tensions between Russia and Ukraine.

However, the Canadian Dollar faces downward pressure due to expectations that the Bank of Canada (BoC) will accelerate interest rate cuts in response to cooling inflation and a struggling economy. Traders are likely to focus on Tuesday's Canadian CPI inflation report for fresh insights into the central bank's policy direction.

The Canadian Dollar (CAD) has edged marginally higher versus a generally softer USD on the session. If markets are recalibrating the USD’s post-election gains, the CAD’s relatively limited rise on the session makes sense—because it has held up marginally better than its peers following the US vote, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD steadies on the daily chart

“While commodities are a little firmer generally today, it has been a rough week for raw materials overall amid concerns about global growth and weak Chinese demand—as well as the stronger USD. The CAD’s principal headwind comes from spreads, however, with short-term cash and swaps spreads having widened significantly in the USD’s favour in the wake of US election.”

“The 2Y cash bond spread reached 117bps earlier this week (the widest since the late 1990s) before narrowing modestly. Short-term price action is reflecting a little softness in the USD since the start of trading in Asia and the USD’s persistent overbought status should keep markets on alert for a pullback in recent gains.”

“But there is nothing in price action to suggest a significant drop in the USD is likely. A short-term consolidation in the USD is possible but minor dips to the 1.3950/55 area are likely to prompt renewed buying. A weekly close above 1.4040 will support the outlook for more medium term gains in the USD towards the 2020 peak just under 1.47.”

• USD/CAD trades flat around 1.4065 in Friday’s early European session. 
• The positive bias of the pair prevails above the 100-period EMA, but the overbought RSI condition might cap its upside. 
• The immediate resistance level emerges at 1.4070; the first downside target to watch is 1.4000.

The USD/CAD pair holds steady near 1.4065 during the early European session on Friday. However, the renewed US Dollar (USD) demand could provide some support to the pair for the time being. Additionally, the decline in crude oil prices might weigh on the Canadian Dollar (CAD) as Canada is the largest oil exporter to the United States (US).

According to the daily chart, the constructive outlook of the USD/CAD remains intact as the pair holds above the key 100-period Exponential Moving Averages (EMA). However, the 14-day Relative Strength Index (RSI) stands above the midline near 77.65, indicating the overbought RSI condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term USD/CAD appreciation.

The upper boundary of the Bollinger Band at 1.4070 acts as an immediate resistance level for the pair. A decisive break above this level could see a rally to the 1.4100 psychological level, en route to 1.4173 (the high of May 7, 2020). 

On the flip side, the initial support level is located at 1.4000, the round mark. A breach of this level could expose 1.3969, the low of November 13. The crucial contention level to watch is the 1.3905-1.3900 zone, representing the confluence of the lower limit of the Bollinger Band and the 100-period EMA.  

USD/CAD 4-hour chart

• USD/CAD trades on a flat note around 1.4060 in Friday’s early Asian session. 
• Fed’s Powell said there is no need to hurry rate cuts as the US economy remains strong. 
• The lower crude oil prices continue to undermine the Loonie.

The USD/CAD pair trades flat near 1.4060 amid the consolidation of the US Dollar (USD) during the early Asian session on Friday. The US October Retail Sales will be in the spotlight on Friday along with the Fedspeak. 

The Greenback holds steady near the fresh 2024 highs despite Trump trades showing signs of slowing. The upside of the pair might be limited amid the cautious remarks from the US Federal Reserve (Fed). On Thursday, Fed Chair Jerome Powell said that the recent performance of the US economy has been “remarkably good,” giving the Fed room to lower interest rates at a careful pace.

Furthermore, Producer inflation in the US rose more than expected in September. Data released by the US Bureau of Labor Statistics on Thursday showed that the US Producer Price Index (PPI) rose 2.4% on a yearly basis in October. This figure followed the 1.9% rise seen in September (revised from 1.8%) and came in above the market expectation of 2.3%.

On the Loonie front, the decline in crude oil prices could weigh on the commodity-linked Canadian Dollar (CAD) in the near term. It's worth noting that Canada is the largest oil exporter to the United States (US), and lower crude oil prices tend to have a negative impact on the CAD value.

• USD/CAD climbs above 1.4000 as Donald Trump would be able to implement policies smoothly.
• Trump’s policies would force the Fed to slow down its rate-cut cycle.
• The BoC is expected to cut interest rates again by 50 bps.

The USD/CAD pair visits the psychological figure of 1.4000 in Thursday’s European session for the first time in more than four years. The Loonie asset strengthens as the US Dollar (USD) extends its rally on firm expectations that President-elected Donald Trump will be able to implement trade and fiscal policies smoothly. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh annual high near 107.00.

Trump vowed in his election campaign that he would raise import tariffs and reduce taxes on corporations and workers, a scenario that will boost economic growth and inflationary pressures. An acceleration in price pressures would limit the Federal Reserve’s (Fed) potential for following an aggressive interest rate cut approach.

Market experts believe that the Fed could pause its policy-easing cycle at the start of the next year. For the December meeting, traders see a 79% chance that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50%, according to the CME FedWatch tool.

For fresh interest rate cues, investors will pay close attention to Fed Chair Jerome Powell’s speech, which is scheduled at 20:00 GMT.

Domestically, the Canadian Dollar (CAD) is also going through a rough time as investors expect the Bank of Canada (BoC) to cut interest rates again by 50 basis points (bps) to 3.25%. This will be the first interest rate cut and the second of a larger-than-usual size in a row.

• The USD/CAD pair may approach the upper boundary of the ascending channel at the 1.4080 level.
• Traders may anticipate a potential downward correction if the 14-day RSI surpasses the 70 mark.
• The immediate support appears at the nine-day EMA at 1.3943 level followed by the 14-day EMA at the 1.3917 level.

The USD/CAD pair gains ground for the fifth successive day, trading around 1.4010 during the Asian session on Thursday. On the daily chart, the analysis indicates that the pair moves upwards within an ascending channel pattern, suggesting an ongoing bullish bias.

The 14-day Relative Strength Index (RSI), a widely used indicator for spotting overbought or oversold conditions, is currently just under the 70 level. This suggests ongoing bullish momentum without yet signaling an overbought state. If the 14-day RSI surpasses 70, traders may anticipate a potential downward correction. A pullback from overbought levels could push the pair back toward the 1.4000-1.3950 range.

On the upside, the USD/CAD pair could test the area near the upper boundary of the ascending channel at the 1.4080 level. A breakout above this channel could strengthen the prevailing bullish trend and propel the pair toward 1.4173, the next key resistance level reached in May 2020.

In terms of support, the USD/CAD pair could test immediate support around the nine-day Exponential Moving Average (EMA) at the 1.3943 level, followed by the 14-day EMA at the 1.3917 level. A break below these EMAs could cause the weakening of the bullish bias and put downward pressure on the pair to test the lower boundary of the ascending channel at the 1.3860 level.

USD/CAD: Daily Chart

• USD/CAD extends the rally to around 1.4000 in Thursday’s early Asian session. 
• US CPI matched estimates in October. 
• The expectation of a more aggressive rate cut from the BoC than the Fed, lower crude oil prices weigh on the Loonie. 

The USD/CAD pair gains momentum to near 1.4000, the highest level since 2020 during the early Asian session on Thursday, bolstered by the stronger Greenback. The attention will shift to the US October Producer Price Index (PPI), which is due later on Thursday. 

The US Dollar (USD) climbed to the highest level since November 2023 due to so-called Trump trades and US inflation data for October. Donald Trump's victory in last week's US presidential election sparked expectations of potentially inflationary tariffs and other measures by his incoming administration, boosting the Greenback. 

US inflation increased as expected in October. Data released by the Labor Department's Bureau of Labor Statistics on Wednesday showed that the Consumer Price Index (CPI) rose by 2.6% YoY in October, matching prior forecasts. Additionally, the core CPI, which excludes the more volatile food and energy categories, jumped by 3.3% YoY during the same period, in line with expectations. This report could result in fewer interest rate cuts from the Federal Reserve next year, which might lift the USD against the Canadian Dollar (CAD). 

On the Loonie front, the expectation that the Bank of Canada (BoC) would keep on cutting rates faster than the Fed drags the CAD lower against the USD. The policymakers discussed the usual 25 basis point (bps) cut but saw a strong consensus among them for the larger step, the summary of deliberations said. 

Furthermore, the decline in crude oil prices continues to undermine the Loonie as  Canada is the largest oil exporter to the United States (US). The rebound in crude oil prices could support the CAD and cap the upside for the pair for the time being. 

• USD/CAD strengthens as the US Dollar appreciates due to optimism surrounding the Trump trades.
• The implementation of US President-elect Donald Trump’s proposed fiscal policies could delay further rate cuts by the Fed.
• The commodity-linked CAD weakens as Oil prices decline following OPEC's lowered forecast for global Oil demand growth in 2024.

USD/CAD moves upwards for the fourth successive session, trading around 1.3960 during the early European hours on Wednesday. The primary factor contributing to the recent weakness in EUR/USD is the strength of the US Dollar (USD) amid optimism surrounding the Trump trades.

The implementation of US President-elect Donald Trump’s proposed fiscal policies could stimulate investment, increase government spending, and bolster labor demand. However, this surge in economic activity could also fuel inflation risks.

On Tuesday, Minneapolis Fed President Neel Kashkari affirmed that the central bank remains confident in its ongoing battle against transitory inflation but cautioned that it is still too early to declare full victory. Kashkari also noted that the Fed would refrain from modeling the economic impact of Trump’s policies until there is greater clarity on the specifics of those policies.

The decline in crude Oil prices continues to weaken the commodity-linked Canadian Dollar (CAD). Notably, Canada remains the largest Oil exporter to the United States (US). As of this writing, West Texas Intermediate (WTI) Oil trades near $68.00. Crude Oil prices fell after the Organization of the Petroleum Exporting Countries (OPEC) reduced its forecast for global Oil demand growth in 2024.

With a quiet economic calendar in Canada this week, the Loonie Dollar is taking a backseat to the Greenback. Traders are now turning their attention to the upcoming US inflation data release on Wednesday, which could provide more insight into future US policy.