Current trend

The USD/CAD pair is slightly growing during the morning session, holding near 1.3900 and the highs of August 5, amid weakening expectations of an aggressive US Fed interest rate cut.

Thus, after the September adjustment by –50 basis points, the head of the regulator, Jerome Powell, called for refraining from a high pace of further monetary policy easing. The markets have almost abandoned such forecasts for the November and December meetings, and now, the probability of the borrowing cost adjustment by –25 basis points next month is about 85.0%.

Investors are awaiting the October labor market statistics. Initial jobless claims may decrease from 254.0K to 123.0K, and average hourly earnings from 0.4% to 0.3% MoM. The indicator may remain at 4.0% YoY and the unemployment rate at 4.1%.

Last week, Bank of Canada officials cut the interest rate by 50 basis points to 3.75%. In the accompanying statement, they noted that experts expected inflation to remain close to target levels, allowing further monetary policy easing. Thus, according to preliminary estimates, the gross domestic product (GDP) will increase by 1.2% in 2024 and 2.1% in 2025, while the consumer price index will be 2.5% and 2.2%, respectively. In 2026, the regulator expects inflation to slow to 2.0%. The head of the department, Tiff Macklem, noted that the measures taken were justified since the interest rate had been raised aggressively enough to contain price pressure. The official also pointed out the need to fix the indicator at a neutral level that does not stimulate or restrict the economy, which requires inflation to consolidate at 2.0%. Thus, despite the “dovish” course supported at the last meeting, traders did not receive a clear indication of the final cost of borrowing.

Support and resistance

On the daily chart, Bollinger bands are growing steadily. The price range is expanding, letting the “bulls” renew local highs. The MACD indicator is trying to reverse into a downward plane, forming a sell signal (the histogram tends to be below the signal line). Stochastic is retreating from the highs, indicating that the American dollar may become overbought in the ultra-short term.

Resistance levels: 1.3908, 1.3950, 1.4000, 1.4050.

Support levels: 1.3862, 1.3838, 1.3800, 1.3765.

Trading tips

Long positions may be opened after a breakout of 1.3908, with the target at 1.4000. Stop loss — 1.3862. Implementation period: 1–2 days.

Short positions may be opened after a rebound from 1.3908 and a breakdown of 1.3862, with the target at 1.3765. Stop loss — 1.3908.