The government shutdown weighed on the dollar sentiment, hindering the dollar's rebound against the Canadian dollar.
2026-02-03 10:16:56
The US dollar weakened slightly against the Canadian dollar in Asian trading on Tuesday, continuing the downward trend of the previous session. Market sentiment was affected by domestic political factors in the United States, putting short-term pressure on the dollar, but the overall trend still showed a clear tug-of-war between bulls and bears.
First, the partial shutdown of the US government dealt an emotional blow to the dollar. Although the US president called on Congress to pass funding bills as soon as possible to end the shutdown, the two parties have significant differences on key issues such as immigration enforcement, making it difficult to reach an agreement in the short term.
This stalemate has not only increased policy uncertainty but also disrupted the release schedule of economic data. The U.S. Bureau of Labor Statistics has suspended some data collection and processing, which may delay the release of key data such as employment, undermining market confidence in the short-term transparency of the U.S. economy.
However, the economic fundamentals have not weakened across the board. The latest manufacturing data shows a significant rebound in US manufacturing activity, with expansion reaching its highest level in recent years. This unexpected improvement in manufacturing activity has, to some extent, alleviated market concerns about a US economic slowdown and provided fundamental support for the US dollar.
Regarding the Canadian dollar, the Bank of Canada signaled a cautious stance. At its January policy meeting, the central bank kept interest rates unchanged for the second consecutive time, emphasizing a significant increase in external uncertainty.
During the press conference, the governor repeatedly mentioned the outlook for U.S. trade policy, geopolitical risks, and the future reassessment of the North American trade agreement, all of which could potentially put pressure on the Canadian economy.
Against this backdrop, although the US dollar weakened in the short term due to political uncertainty, the Canadian dollar also faced challenges from the external environment, making it difficult for the USD/CAD exchange rate to experience a one-sided trend.
From a daily chart perspective, the USD/CAD pair had previously maintained an upward trend, showing signs of consolidation in the high-level area. Recently, the price has retreated slightly from its recent high, but it remains above the key support zone, indicating that the trend has not yet fundamentally reversed.
The candlestick pattern shows that the exchange rate encountered significant resistance around 1.37 and then pulled back, with short-term momentum slowing down. However, the trading volume was limited during the decline, indicating that the bears did not gain sustained dominance, and the market is more likely to consolidate at higher levels than to trend downwards.
From a structural perspective, the 1.3600 range forms a significant support zone, coinciding with the previous consolidation platform and the convergence of medium-term moving averages. As long as the price holds above this range, the overall bullish structure is likely to continue. On the upside, the 1.3750 area is a major short-term resistance zone. If the price regains its footing above this range, it may resume its upward trend.
Conversely, before a breakout occurs, prices are more likely to fluctuate within a range. Overall, the USD/CAD daily chart shows characteristics of consolidation at high levels with no clear trend reversal, and the short-term trend still needs new fundamental clues to guide its direction.
Editor's Note:
The USD/CAD pair is currently in a phase where political turmoil and economic resilience are mutually offsetting. The US government shutdown is exerting short-term downward pressure on the dollar, but stronger-than-expected manufacturing data has eased fundamental concerns, limiting the dollar's decline.
Meanwhile, the Bank of Canada's emphasis on external uncertainties has also weakened the Canadian dollar's upward momentum. In the short term, a range-bound approach is more suitable for viewing the USD/CAD exchange rate. Until the impact of US political issues and economic data becomes clearer, the probability of a trend-breaking breakout in the exchange rate is limited.
Going forward, it is crucial to closely monitor the progress of the US government shutdown and the further impact of North American trade developments on market sentiment.
First, the partial shutdown of the US government dealt an emotional blow to the dollar. Although the US president called on Congress to pass funding bills as soon as possible to end the shutdown, the two parties have significant differences on key issues such as immigration enforcement, making it difficult to reach an agreement in the short term.
This stalemate has not only increased policy uncertainty but also disrupted the release schedule of economic data. The U.S. Bureau of Labor Statistics has suspended some data collection and processing, which may delay the release of key data such as employment, undermining market confidence in the short-term transparency of the U.S. economy.
However, the economic fundamentals have not weakened across the board. The latest manufacturing data shows a significant rebound in US manufacturing activity, with expansion reaching its highest level in recent years. This unexpected improvement in manufacturing activity has, to some extent, alleviated market concerns about a US economic slowdown and provided fundamental support for the US dollar.
Regarding the Canadian dollar, the Bank of Canada signaled a cautious stance. At its January policy meeting, the central bank kept interest rates unchanged for the second consecutive time, emphasizing a significant increase in external uncertainty.
During the press conference, the governor repeatedly mentioned the outlook for U.S. trade policy, geopolitical risks, and the future reassessment of the North American trade agreement, all of which could potentially put pressure on the Canadian economy.
Against this backdrop, although the US dollar weakened in the short term due to political uncertainty, the Canadian dollar also faced challenges from the external environment, making it difficult for the USD/CAD exchange rate to experience a one-sided trend.
From a daily chart perspective, the USD/CAD pair had previously maintained an upward trend, showing signs of consolidation in the high-level area. Recently, the price has retreated slightly from its recent high, but it remains above the key support zone, indicating that the trend has not yet fundamentally reversed.
The candlestick pattern shows that the exchange rate encountered significant resistance around 1.37 and then pulled back, with short-term momentum slowing down. However, the trading volume was limited during the decline, indicating that the bears did not gain sustained dominance, and the market is more likely to consolidate at higher levels than to trend downwards.
From a structural perspective, the 1.3600 range forms a significant support zone, coinciding with the previous consolidation platform and the convergence of medium-term moving averages. As long as the price holds above this range, the overall bullish structure is likely to continue. On the upside, the 1.3750 area is a major short-term resistance zone. If the price regains its footing above this range, it may resume its upward trend.
Conversely, before a breakout occurs, prices are more likely to fluctuate within a range. Overall, the USD/CAD daily chart shows characteristics of consolidation at high levels with no clear trend reversal, and the short-term trend still needs new fundamental clues to guide its direction.
Editor's Note:
The USD/CAD pair is currently in a phase where political turmoil and economic resilience are mutually offsetting. The US government shutdown is exerting short-term downward pressure on the dollar, but stronger-than-expected manufacturing data has eased fundamental concerns, limiting the dollar's decline.
Meanwhile, the Bank of Canada's emphasis on external uncertainties has also weakened the Canadian dollar's upward momentum. In the short term, a range-bound approach is more suitable for viewing the USD/CAD exchange rate. Until the impact of US political issues and economic data becomes clearer, the probability of a trend-breaking breakout in the exchange rate is limited.
Going forward, it is crucial to closely monitor the progress of the US government shutdown and the further impact of North American trade developments on market sentiment.
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