USD/CAD Price Forecast: Further gains supported by debate over size of Fed’s next rate hike

• Lower oil prices weigh on the Canadian Dollar as USD/CAD climbs towards 1.4213.
• Concerns over aggressive Fed policy tightening lend support to the US Dollar.
• October’s US CPI figures continued to exceed expectations.

Falling oil prices, driven by hopes of a United States (US)-Iran deal, have combined with renewed concerns over aggressive Federal Reserve (Fed) monetary tightening to lift USD/CAD. Against this backdrop of multiple headwinds, the Canadian Dollar (CAD) continues to lag the US Dollar (USD).

At the time of writing, a 0.17% rise has taken USD/CAD to around 1.4213, its highest point in more than three weeks. Meanwhile, the US Dollar Index (DXY), a measure of the Greenback against six major currencies, is trading near 102.37, up 0.15%.

WTI Oil has retreated almost 18% from its recent highs of 104.03 to around $85.35. Falling oil prices reduce the appeal of currencies belonging to net energy-exporting economies such as Canada.

Fed December rate rise viewed as assured, with focus turning to its size

A December rate rise is now effectively assured in the view of TD Securities, which says the “strong upside surprise in the US CPI makes a December hike all but certain,” and reiterates that “today's data certainly seals a Dec rate hike by the Fed.” Governor Waller’s remarks ahead of the CPI release have brought the possible need for a “catch-up” move into sharper focus. As strategists put it, “after Waller's speech, the debate has now shifted to whether the FOMC will go 25 or 50bps,” with TD Securities saying the discussion will centre on a “catch-up 50bps rate hike in December, or whether to maintain course with a 25bps rate increase and provide strong guidance toward a potential January follow-through.” Their current preference remains unchanged: “we still favor a 25bp hike with a rising risk of another hike in January.”

USD/CAD Maintains a Bullish Technical Bias

Trading at 1.4212 on the daily chart, USD/CAD retains a bullish near-term outlook after moving above its 20-day Exponential Moving Average (EMA) at 1.4085. That average now provides support for the advance. At 63.9, the Relative Strength Index (RSI) remains in positive territory without yet indicating overbought conditions. This suggests buyers remain in control, although consolidation could follow the recent recovery.

The 1.4210 area provides the nearest downside support and serves as a nearby pivot. Below that, the 20-day EMA at 1.4085 could attract renewed buying on any pullback. As this dataset shows no significant technical resistance immediately above the current price, attention centres on buyers’ ability to hold these underlying support levels and prolong the broader uptrend.

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