The USD/CAD pair remained on the defensive on Monday, trading near the 1.4000 psychological level during the Asian session. Despite the negative bias for the second consecutive day, the pair held above the 200-day Simple Moving Average (SMA) and lacked follow-through selling, as supportive factors for the Canadian Dollar (CAD) limited further declines.
Oil recovery and Canadian jobs data support the Loonie
Crude Oil prices opened the week with a bullish gap, recovering part of last week’s slump to a five-month low. The rebound followed former US President Donald Trump’s softer tone on the threatened 100% tariffs on Chinese imports, easing fears of a deepening US-China trade conflict. Oil’s recovery bolsters demand for the commodity-linked Loonie.
Friday’s Canadian employment report added further support, showing a stronger-than-expected increase of 60,400 jobs in September. The upbeat labor data reinforces the CAD and acts as a headwind for the USD/CAD pair, limiting the upside for the US Dollar (USD).
USD remains under pressure
The USD struggled to attract meaningful buying interest amid a global risk-on mood, consolidating Friday’s corrective slide. Expectations for two additional Federal Reserve rate cuts this year and the ongoing US government shutdown continue to weigh on the greenback. These factors, combined with persistent trade uncertainties, have capped USD/CAD upside and discouraged aggressive directional bets.
Technical outlook: support near 1.3980–1.3975
From a technical perspective, last week’s breakout above the 200-day SMA and the 1.4000 mark—first seen since April—signals key support levels for USD/CAD. Any corrective pullback is likely to find buyers near 1.3980–1.3975 (200-day SMA), with horizontal support around 1.3940–1.3935 limiting further downside. Thin liquidity due to holidays in the US and Canada adds caution for traders amid a mixed fundamental backdrop.
