Today market outlook

[Zeologic]

The Canadian dollar faces pressure from US-Canada trade risks.

The USDCAD commodity currency pair shows a bullish bias, indicating that the CAD remains under significant pressure relative to the USD, although the pair's upward momentum could stall if oil prices strengthen. On September 23, USDCAD formed a bullish candlestick, extending previous gains. The price currently hovers around 1.41029, with a high of 1.41096 and a low of 1.40566 on the FXOpen chart.

The US dollar retains its appeal amidst global geopolitical uncertainty and market expectations for a relatively cautious Fed interest rate policy path. The Fed raised interest rates by 25 basis points to the 3.75%–4.00% range on September 16—the first hike since 2023—whereas the Bank of Canada (BoC) held rates steady at 2.25% on September 2. An interest rate differential of 1.50–1.75 percentage points between the Fed and the BoC provides support for the USD against the CAD.

Canadian inflation remains around 3%, driven primarily by a surge in energy prices, while core inflation holds steady near the 2% target. The USD is gaining support from rising US bond yields, driven by relatively strong US economic data and expectations of a more hawkish Fed policy, making USD-denominated assets relatively more attractive.

The CAD faces risk-related pressure stemming from US-Canada trade dynamics. BoC Governor Tiff Macklem stated that new US tariffs could suppress Canadian growth in the fourth quarter to below 1%, down from the previous projection of 1.5%. However, relatively high oil prices provide support for the CAD, given Canada's status as an energy exporter. Macklem also noted that oil prices around the $100 mark could keep Canadian inflation elevated.

Today, the market will focus on retail sales data. For the USD, attention is centered on the release of Initial Jobless Claims and New Home Sales figures, as well as comments from Fed officials. Strong US data could once again drive up US bond yields and support the USD. Technically, USDCAD is trading above the MA50 and shows a bullish bias; the primary trading range is estimated to be between 1.39700 and 1.41200. Immediate support is around 1.40000, with the next target at 1.3960. Immediate resistance is around 1.4100, with the next target at 1.4150. This forecast could be wrong.