FX.co ★ USD/CAD. Analysis and Forecast

The USD/CAD pair continues to decline from the weekly high near 1.3850. Current quotes appear to have ended a four-day period of gains and are now trading slightly below the round level of 1.3800, as market participants await the key monthly employment figures — NFP.

The U.S. NonFarm Payrolls report, to be released later during the North American session, will play a major role in the short-term direction of the U.S. dollar. This release, combined with Canada's monthly employment data, should provide momentum for USD/CAD and open short-term trading opportunities.

At the same time, growing certainty that the Federal Reserve will cut borrowing costs in September and deliver at least two additional 25-basis-point rate cuts before the end of the year is forcing dollar bulls into a defensive stance. This, in turn, is seen as a factor putting some downward pressure on USD/CAD. However, uncertainty over trade issues may limit the Canadian dollar's upward potential.

U.S. President Donald Trump has filed an appeal with the Supreme Court requesting urgent review in an attempt to overturn an appellate court ruling that declared most of his tariffs illegal. In addition, Trump announced that his administration would impose tariffs on semiconductor imports from companies that do not relocate production to the U.S., in the context of talks on the free trade agreement between the U.S., Mexico, and Canada.

Moreover, low crude oil prices may deter traders from taking active long positions on the Canadian dollar — a commodity-linked currency — and help contain losses in USD/CAD. Still, spot prices are on track to record a modest weekly gain and remain influenced by U.S. dollar dynamics.

From a technical perspective, oscillators on the daily chart are positive. The pair is finding support at the 9-day EMA near the round level of 1.3800. If prices manage to return to 1.3850, they could continue moving toward the 1.3900 round level, with some resistance around 1.3870.

On the other hand, prices could fall toward the 50-day SMA, then pause at the 100-day SMA, below which bulls will struggle to compete with bears.