USD/CAD Price Forecast: Strong buying interest evident with RSI near 66

• Diverging Fed-BoC rate expectations put pressure on the Canadian Dollar, keeping USD/CAD close to a one-month high.
• With the RSI around 66 indicating firm buying momentum, USD/CAD retains a bullish bias above its 50-day and 100-day SMAs.
• Initial support for the pair lies at 1.4200, with immediate resistance at 1.4300.

Trading around 1.4245 at the time of writing, USD/CAD is down 0.04% on Thursday, leaving it little changed and close to a one-month high. The Canadian Dollar (CAD) remains under pressure from broad US Dollar (USD) strength and diverging interest rate expectations for the Federal Reserve (Fed) and the Bank of Canada (BoC).

Canadian Dollar faces pressure from USD strength as BoC rate rise expectations recede

A softening Canadian labour market relative to the US underpins TD Securities’ view that the US Dollar has further room to strengthen against selected major currencies. Its analysts say that “across global major currencies, we see room for the USD to rally selectively against CAD and KRW in the near-term.” They also argue that “diverging employment data releases will likely keep USDCAD supported above 1.40,” pointing to the relative weakness in Canada’s labour market. TD highlights in particular that a “rising unemployment rate amid falling wage growth rate in Canada also reduces the market pricing of a December BoC rate hike relative to the Fed,” supporting its expectation of continued near-term pressure on the Canadian Dollar against the Dollar.

Technical Outlook Remains Bullish

Having recovered all its October losses, USD/CAD now trades above both the 50-day and 100-day Simple Moving Averages (SMAs), leaving buyers in control. The 200-day SMA sits well beneath the prevailing price.

The momentum indicators also support the bullish outlook. At around 66, the Relative Strength Index (RSI) is approaching overbought territory, while the Moving Average Convergence Divergence (MACD) holds in positive territory above its recent lows, suggesting that buying interest persists.

A pullback would first encounter support around 1.4200 and then at 1.4120, a former resistance level that now provides support. Further down, a group of trend-supporting averages, bounded by the 50-day SMA at 1.4074 and the 100-day SMA at 1.4044, should provide an additional cushion before the longer-term 200-day SMA at 1.3909.

For further advances, the first hurdle is the October high around 1.4300. Clearing that resistance could allow the pair to extend its gains towards the psychological level of 1.4400.

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