The USD/CAD pair edged lower during Asian trading on Friday, hovering near 1.4040 as renewed US Dollar (USD) weakness weighed on the pair. The Greenback came under pressure amid escalating trade tensions, a prolonged US government shutdown, and rising expectations that the Federal Reserve (Fed) will deliver additional interest rate cuts in the coming months.
The US Dollar’s decline accelerated as investors grew increasingly cautious about the economic fallout from both the government shutdown and ongoing trade disputes with China. President Donald Trump’s renewed trade war rhetoric has revived concerns about global growth, though US Treasury Secretary Scott Bessent hinted that Washington could maintain a temporary truce before implementing further tariff increases.
Meanwhile, the US federal government shutdown—now stretching into its third week—shows no sign of resolution. The Senate once again failed to pass the GOP-led funding bill on Thursday, marking the tenth unsuccessful attempt to reopen the government. The White House announced that it expects to furlough at least 10,000 federal workers as the standoff intensifies, adding further strain to the domestic economy.
Speculation over upcoming Fed policy moves also contributed to the USD’s downside. Fed Governor Christopher Waller reaffirmed his support for another interest rate cut at this month’s policy meeting, citing uneven labor market data. Similarly, newly appointed Governor Stephen Miran advocated for a more aggressive easing path through October, signaling deepening dovish sentiment within the central bank.
However, losses in the pair may remain limited as falling crude oil prices weigh on the Canadian Dollar (CAD). Given Canada’s status as a major oil exporter to the United States, weaker oil prices often translate into downward pressure on the CAD, partially offsetting the impact of USD weakness.
From a technical perspective, the USD/CAD pair remains supported above the 1.4000 psychological level. A sustained move below this area could open the door toward 1.3960, while resistance is seen near 1.4080, followed by 1.4120.
