USDCAD Fails at Resistance Below 1.40, but Buyers Persist

USDCAD surged for more than a month, but failed to push above 1.40, rejected by the resistance zone twice. However, buyers keep coming back after every retreat. This shows resilience and they will likely break above the 1.40 level soon, as the Canadian economy continues to disappoint.

Canada’s latest employment report, released earlier today alongside other weaker economic indicators, showed that job gains were about half of what analysts expected. This reinforces the Bank of Canada’s stance toward easing, with the market expecting additional rate cuts following the recent 50 basis point reduction.

Canada October Employment Report:

• • Employment Change: +14.5K (expected +25.0K); prior month was +46.7K.
  • Unemployment Rate: 6.5% (expected 6.6%); unchanged from the previous month at 6.5%.

• Employment Breakdown:

  • Full-Time Employment: +25.6K (prior +112.0K).
  • Part-Time Employment: -11.2K (prior -65.3K).
  • Private Sector Employment: +20.5K (prior +61K).
  • Public Sector Employment: -17.2K (prior -24K).
• Additional Metrics:
  • Participation Rate: 64.8% (prior 64.9%).
  • Average Hourly Wages (y/y): +4.9% (prior +4.5%).

October’s Ivey PMI also indicated an economic slowdown. Meanwhile, the outlook for U.S. Federal Reserve rate cuts is becoming less dovish, with Barclays now forecasting just one 25 basis point cut by the Fed in 2025. This relatively hawkish stance supports the USD. Since early September, the USD/CAD exchange rate has risen steadily, gaining over 5 cents. Despite two sharp downward corrections this week, strong support has held firm. Buyers stepped in both times, lifting prices and creating higher lows—a bullish sign for the pair.

USD/CAD Chart H4 – The 100 SMA Held as Support Yesterday

Before the recent data release, the market was factoring in a 40% chance of a 25 bps cut and a 60% chance of a 50 bps cut from the Bank of Canada. Following the data, the probability slightly shifted toward the 25 bps cut. USD/CAD . While the data doesn’t yet confirm a 50 bps cut, the Bank of Canada will likely watch for further signs of labor market weakness.

They’ll also have another employment report to review before their December 11 meeting. The decline in the participation rate from 65.7% at the beginning of 2023 to the current 64.8% is a notable concern, as participation now sits at its lowest point since 1997 (excluding the pandemic period). Youth unemployment remains a demographic concern, despite a reduction of 33,000 in youth joblessness last month.

USD/CAD Live Chart