USD bulls look to US PPI as Canadian Dollar holds around 1.4250, near one-month low

• USD/CAD consolidates its gains on Friday, with USD bulls taking a pause.
• A modest rise in oil prices supports the Loonie, helping to cap the pair's advance.
• Expectations of an imminent Fed rate rise and risks surrounding Iran support USD bulls before the US PPI release.

Following strong gains over the past week or so, USD/CAD is consolidating around the mid-1.4200s, close to a one-month high, in the first half of Friday's European session.

After a sharp three-day advance to its highest level since April 2025, the US Dollar (USD) edges lower as bullish traders take a pause. A modest increase in crude oil prices also appears to lend support to the commodity-linked Loonie, helping to restrain USD/CAD. Nevertheless, several factors should remain supportive of the Greenback and help cushion any decline in the pair.

US consumer inflation for October exceeded expectations, while hawkish remarks from several Federal Reserve (Fed) officials led traders to price in tighter monetary policy. Markets now fully price in a December rate increase of 25 basis points (bps), alongside roughly a 13% probability of a larger 50-bps rise next month. Together with uncertainty in the Middle East, these expectations favour USD bulls.

On Thursday, US President Donald Trump delivered another warning to Iran, saying those behind any attack on American officials would no longer exist. He also said he would not hesitate to take further military action should circumstances warrant it. In a Truth Social post, Trump added that the US did not need an agreement with Iran and that those days had long since passed.

Ongoing attacks on Saudi Arabia's energy infrastructure and commercial vessels in the Strait of Hormuz also sustain the geopolitical risk premium, lending support to both crude oil and the safe-haven Greenback. Attention now turns to the US Producer Price Index (PPI). Alongside speeches by influential FOMC members, the release would shape demand for the USD and give USD/CAD fresh impetus.

Dollar extends rally as hot US inflation strengthens Fed rate rise expectations

Short-dated US yields are now “close to 40bp higher since Tuesday morning, when the Fed's Christopher Waller mused over the need for a 50bp hike in December.” Against that backdrop, ING analysts observe that “this week has seen a powerful, macro-driven rally in the Dollar,” adding that the market has “since adopted the view that back-to-back December and January hikes look likely, while extending the full Fed adjustment from here to a full 85bp of tightening.”

For the next catalyst, ING points to October's US PPI, which it says “looks likely to keep the narrative of hot US inflation alive.” The analysts anticipate close “scrutiny into the components of PPI, such as healthcare, airfares and software, that feed into the Fed's preferred PCE inflation data – the next release of which is on 25 November.” The recent repricing at the front end of the US yield curve would gain further support, ING suggests, adding that, “were that core PCE to rise 0.3% month-on-month for the third month in a row, expectations of a 50bp December hike would grow,”

USD/CAD on the daily chart

Technical Outlook

With USD/CAD trading comfortably above the 200-period Exponential Moving Average (EMA) at 1.3968, the near-term outlook remains bullish. Confirmation of further upside would, however, require follow-through buying above the previous year-to-date peak near 1.4300.

Should the pair slip below immediate support at 1.4200, buyers are more likely to emerge, with the decline remaining contained around 1.4125. The next level is 1.4100; a break beneath it could bring the 200-day EMA near 1.3968 into view. While spot prices hold above this moving-average support, the technical picture suggests corrective declines are likely to be arrested before a more pronounced bearish phase develops.

(The technical analysis of this story was written with the help of an AI tool. Know more.)