USDCAD: Patient Fed & oil drop support iH&S projection to 1.4370
USDCAD is building an interesting medium-term setup as crude oil weakness combines with Fed patience and supports dollar strength against the loonie, with an inverse head-and-shoulders pattern pointing to a measured-move target near 1.4370.
Crude oil recently broke below $60, directly pressuring the Canadian dollar since Canada is a major commodity exporter. Meanwhile, the Fed's cautious stance on rate cuts, despite labour market softness ahead of a potential partial NFP on Friday, keeps the buck bid as investors hold dollars for yield.
The technical structure confirms what the macro backdrop suggests: USDCAD has room to run higher from current levels.
Key drivers
Use 1.3985 as your line in the sand, consider longs above this level with the first target at the peak of 1.4145 (validation of the breakout), the second at 1.4250, and trail stops toward 1.4370 if momentum holds. Watch for oil to remain below $60 and Fed messaging to stay cautious, as a daily close below 1.3985 would shift the bias to consolidation, while full pattern invalidation sits at 1.3720.
This content is not directed to residents of the EU or UK. Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Crude oil recently broke below $60, directly pressuring the Canadian dollar since Canada is a major commodity exporter. Meanwhile, the Fed's cautious stance on rate cuts, despite labour market softness ahead of a potential partial NFP on Friday, keeps the buck bid as investors hold dollars for yield.
The technical structure confirms what the macro backdrop suggests: USDCAD has room to run higher from current levels.
Key drivers
- Oil breakdown hurts CAD: crude slipped below $60 recently, and every time oil weakens, the commodity-linked loonie follows. This correlation has been tracking cleanly since July, when USDCAD turned higher alongside the energy sell-off.
- Fed patience supports USD: Despite labour-market weakness signals from existing data releases, the Fed isn't rushing to cut in December, and a patient central bank typically supports the dollar because investors can hold dollars and earn decent carry while awaiting clarity on policy.
- Inverse H&S pattern: The technical setup shows a head near 1.3537, a neckline breakout near 1.3900, and a clean retest at 1.3985 (former 2022 resistance turned support). The measured move from head to neckline brings 1.4370 into play, with intermediate targets at swing levels.
- RSI reset above 50: After showing flat divergence at the recent highs, the RSI has reset by bouncing cleanly off the 50 line on the daily chart, suggesting momentum has room for another leg higher before any overbought concern.
Use 1.3985 as your line in the sand, consider longs above this level with the first target at the peak of 1.4145 (validation of the breakout), the second at 1.4250, and trail stops toward 1.4370 if momentum holds. Watch for oil to remain below $60 and Fed messaging to stay cautious, as a daily close below 1.3985 would shift the bias to consolidation, while full pattern invalidation sits at 1.3720.
This content is not directed to residents of the EU or UK. Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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Exención de responsabilidad
La información y las publicaciones no constituyen, ni deben considerarse como, asesoramiento o recomendaciones financieras, de inversión, de trading u otro tipo, proporcionadas o respaldadas por TradingView. Obtenga más información en Condiciones de uso.