Expectations of a Fed rate cut are rising, and the US dollar continues to weaken, putting pressure on the US dollar to fall against the Canadian dollar.
2025-10-16 13:46:05
The USD/CAD pair continued its decline during Thursday's Asian session, extending its losses from the previous session. The dollar's weakness stemmed primarily from a reassessment of the Federal Reserve's future policy path.
In a speech on Tuesday, Federal Reserve Chairman Jerome Powell said the central bank is expected to cut interest rates by another 25 basis points in October, and further cuts are possible this year. Powell pointed out that the pace of hiring in the United States has slowed, and if the government shutdown continues, it will deepen the risk of an economic slowdown.
Data from the CME FedWatch market tool shows a 98% probability of a rate cut in October, while the likelihood of another rate cut in December is about 93%. This suggests that investors have fully priced in the easing expectations, putting pressure on the US dollar.
Market analyst Liam Roberts pointed out: "If the Federal Reserve continues to cut interest rates, it will significantly weaken the interest rate advantage of the US dollar, and rising oil prices will provide additional support for the Canadian dollar."
At the same time, external risk sentiment further weighed on the dollar. US President Trump said on Wednesday that "the United States is in a full-scale trade conflict with Asian countries." Although Treasury Secretary Bessent proposed suspending some high tariffs to ease the dispute over mineral exports, market concerns have not subsided.
Ongoing trade tensions have heightened investor risk aversion and limited overall confidence in the US dollar. According to market research, US President Trump announced that Indian Prime Minister Narendra Modi has pledged to stop importing Russian crude oil, a move that is expected to further tighten global crude oil supply.
"As long as oil prices remain above $58 a barrel, the Canadian dollar's commodity currency attributes will continue to suppress the U.S. dollar," said energy strategist Rachel Kim.
From a technical perspective, the USD/CAD pair has closed lower for two consecutive days and stabilized near 1.4030. A break below 1.4000 would open up further downside potential, targeting 1.3950 (the 38.2% Fibonacci retracement level of the recent uptrend).
Short-term technical indicators show a bearish momentum, but the stochastic oscillator has entered the oversold zone, suggesting a possible short-term technical rebound. Initial resistance on the upside is located in the 1.4080-1.4100 range. If this area is broken, it may retest the previous high of 1.4150.
Technical analyst James Turner believes that as long as the USD/CAD closes above 1.4000, short-term downside risk is limited, but a break below that level would confirm the formation of a stage top.
Editor's opinion:
Strengthening expectations of a Federal Reserve rate cut, coupled with rising oil prices, give the Canadian dollar a clear advantage in fundamentals. In the short term, a break below the 1.4000 level could trigger further selling pressure against the Canadian dollar, potentially targeting 1.3920. The medium-term outlook remains dependent on the pace of the Federal Reserve's policy and changes in global crude oil supply and demand.
In a speech on Tuesday, Federal Reserve Chairman Jerome Powell said the central bank is expected to cut interest rates by another 25 basis points in October, and further cuts are possible this year. Powell pointed out that the pace of hiring in the United States has slowed, and if the government shutdown continues, it will deepen the risk of an economic slowdown.
Data from the CME FedWatch market tool shows a 98% probability of a rate cut in October, while the likelihood of another rate cut in December is about 93%. This suggests that investors have fully priced in the easing expectations, putting pressure on the US dollar.
Market analyst Liam Roberts pointed out: "If the Federal Reserve continues to cut interest rates, it will significantly weaken the interest rate advantage of the US dollar, and rising oil prices will provide additional support for the Canadian dollar."At the same time, external risk sentiment further weighed on the dollar. US President Trump said on Wednesday that "the United States is in a full-scale trade conflict with Asian countries." Although Treasury Secretary Bessent proposed suspending some high tariffs to ease the dispute over mineral exports, market concerns have not subsided.
Ongoing trade tensions have heightened investor risk aversion and limited overall confidence in the US dollar. According to market research, US President Trump announced that Indian Prime Minister Narendra Modi has pledged to stop importing Russian crude oil, a move that is expected to further tighten global crude oil supply.
"As long as oil prices remain above $58 a barrel, the Canadian dollar's commodity currency attributes will continue to suppress the U.S. dollar," said energy strategist Rachel Kim.
From a technical perspective, the USD/CAD pair has closed lower for two consecutive days and stabilized near 1.4030. A break below 1.4000 would open up further downside potential, targeting 1.3950 (the 38.2% Fibonacci retracement level of the recent uptrend).
Short-term technical indicators show a bearish momentum, but the stochastic oscillator has entered the oversold zone, suggesting a possible short-term technical rebound. Initial resistance on the upside is located in the 1.4080-1.4100 range. If this area is broken, it may retest the previous high of 1.4150.
Technical analyst James Turner believes that as long as the USD/CAD closes above 1.4000, short-term downside risk is limited, but a break below that level would confirm the formation of a stage top.
Editor's opinion:
Strengthening expectations of a Federal Reserve rate cut, coupled with rising oil prices, give the Canadian dollar a clear advantage in fundamentals. In the short term, a break below the 1.4000 level could trigger further selling pressure against the Canadian dollar, potentially targeting 1.3920. The medium-term outlook remains dependent on the pace of the Federal Reserve's policy and changes in global crude oil supply and demand.
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