USD/CAD Price Forecast: Might correct further to near 1.4140 as oscillators start cooling down

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The USD/CAD pair trades flat at around 1.14195 during the European trading session on Monday. The Loonie pair consolidates as investors shift focus to the United States (US) Nonfarm Payrolls (NFP) data for June, which will be released on Thursday.

USD/CAD trades flat at around 1.4195 with investors awaiting the US NFP data release.
Fed’s Warsh signaled that forward-looking monetary policy statements should not be provided at current policy juncture.
The US and Iran are scheduled to talks regarding the Hormuz future on Tuesday.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally lower at around 101.30.

The impact of the US NFP data will be significant on the Federal Reserve’s (Fed) monetary policy outlook, as new Chairman Kevin Warsh said in the monetary policy conference this month that the central bank should refrain from delivering forward-looking remarks in the current policy conjuncture.

Before the US NFP data, investors will focus on the US JOLTS Job Openings data for May, and the ISM Manufacturing PMI and ADP Employment Change data for June.

On the geopolitical front, investor await US-Iran talks regarding Tehran’s authority near the Strait of Hormuz in Oman on Tuesday.

USD/CAD technical analysis

USD/CAD trades flat at around 1.4193, maintaining a bullish near-term bias as spot holds comfortably above the 20-period exponential moving average (EMA) at 1.4065. The positioning reinforces an underlying uptrend, while the Relative Strength Index (RSI) at 78.9 sits deep in overbought territory, hinting that bullish pressure remains strong but increasingly vulnerable to a corrective pause or minor pullback.

On the downside, initial support emerges at the November 5 high at around 1.4140, followed by the 20-period EMA near 1.4065, where buyers could attempt to defend the broader advance on any retracement. Looking up, the pair needs to resume its upside and extend it above the June 24 high at 1.4248 to rise further towards the April 2025 high around 1.4300.

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

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.