• Oil prices dipped as supply disruption fears eased.

• The pair got a boost from Friday’s upbeat US nonfarm payrolls report.

• Traders are pricing an 86% chance of a 50-bps Fed rate cut in November.

The USD/CAD price analysis suggests further upside for the pair as the Canadian dollar weakens amid a decline in oil prices. Simultaneously, the dollar strengthened as market participants slashed Fed rate cut bets.

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Oil prices dipped on Tuesday as supply disruption fears eased in the calm after Iran attacked Israel. Markets have paused as they wait to see whether Israel will retaliate. Retaliation could mean attacks on Iranian oil that would tighten the market and push prices higher. A pullback in oil weighed heavily on the Canadian dollar. As a result, the USD/CAD pair rallied.

Furthermore, the pair got a boost from Friday’s US nonfarm payrolls report, which shifted the outlook for Fed rate cuts. Before the figures, markets were pricing an over 30% chance of a 50-bps rate cut in November. However, data revealed an unexpected 254,000 new jobs in the US. Moreover, the unemployment rate eased to 4.1%, suggesting a resilient labor market. Consequently, market participants adjusted rate cut bets, pricing an 86% chance of a 50-bps rate cut in November.

A shift from an aggressive to a gradual pace is bullish for the dollar, but only for a while. As long as borrowing costs continue dropping, the greenback will suffer. All eyes are now on the upcoming US CPI report. Inflation has consistently fallen, and economists expect it to reach 2.3% in September. Policymakers are also more confident that inflation will reach the 2% target. Therefore, the report might not significantly change the outlook for rate cuts.

USD/CAD key events today

There won’t be any significant reports from Canada or the US. Therefore, market participants will watch developments in the Middle East war.

USD/CAD technical price analysis: Limited bullish momentum

On the technical side, the USD/CAD price has maintained a steep rally since breaking above and retesting the 30-SMA. Since then, it has broken above several key resistance levels. Bulls are now targeting the 1.3650 resistance level.

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However, the RSI currently sits in the overbought region, indicating a maximum for bulls. Therefore, they might not be strong enough to breach 1.3650 without first pulling back. A retreat would allow the pair to retest the 1.3600 level or the 30-SMA.

https://www.forexcrunch.com/blog/2024/10/08/usd-cad-price-analysis-oil-slump-drags-cad-down/