1.40 Next Target for USD/CAD as BOC Suggests More Rate Cuts

USD/CAD has been gaining for four weeks and will close October bullish as it climbs above 1.39 after BOC governor Macklem’s rate cut comments. The next target comes at the major level of 1.40, with some minor hurdles before that, while the fundamentals in Canada and the US will continue to keep this pair bullish.

Commodity-linked currencies, particularly the Canadian dollar, continue to be among the weakest, with the USD breaking above 1.39 as the dollar gains strength. Buyers maintain control as moving averages provide support, enabling the price to push higher despite the recent slowdown in USD’s bullish momentum. The lows are getting higher as well, as the weekly chart below shows, with moving averages supporting during pullbacks.

USD/CAD Chart Weekly – The First Resistance Has Been Broken

This year, the 100 SMA (green) has been a strong support level. In addition, markets reacted negatively to China’s latest stimulus package; although it exceeded expectations in size, the extended timeframe of three years disappointed traders, leading to further declines in commodity currencies. Yesterday, Bank of Canada Governor Tiff Macklem also noted Canada’s economic struggles, acknowledging that while rate cuts are starting to show effects, more reductions may be forthcoming—another factor weighing on CAD and benefiting USD/CAD .

Comments form Bank of Canada Governor Tiff Macklem

• If the economy follows the current forecast, additional rate cuts are likely to help boost demand and control inflation.
• Recent rate reductions are beginning to show effects in the economy.

The Bank of Canada appears committed to a gradual easing path, aiming to support economic growth without destabilizing inflation targets, which will keep the pressure on for the CAD, helping buyers in USD/CAD. This forward guidance suggests the BOC will continue monitoring economic indicators closely, adjusting its policy as needed to address any shifts in demand or inflation.

USD/CAD Live Chart