The US dollar continued its decline against the Canadian dollar in Asian trading on Thursday, marking its second consecutive day of losses, currently trading at 1.3950. The simultaneous victory of the Democratic Party in both the House and Senate in the US midterm elections fueled market expectations of a policy deadlock in Washington, leading to a concentrated sell-off of the dollar and becoming the main driver of the currency pair's downward pressure. Market expectations that a Democratic-controlled Congress would pressure for de-escalation of the US-Iran conflict also pushed oil prices towards a one-month low. However, a clear internal balancing logic exists within the market. Weak crude oil prices directly dragged down the Canadian dollar, which is highly tied to energy exports, limiting the downside potential of the USD/CAD pair. Persian Gulf crude oil exports have begun to recover, leading to a short-term supply exceeding demand. Coupled with Congress's intention to cut funding for Middle East military operations, multiple factors have collectively suppressed oil prices. However, the US-Iran conflict remains uncertain, and geopolitical risks have not been completely eliminated. US employment data demonstrates economic resilience; the ADP nonfarm payrolls for October showed an increase of 86,000 private sector jobs, higher than the market expectation of 69,000, while the September figure was revised down from 90,000 to 86,000. The ISM services PMI slightly declined to 54.5, slightly below expectations, but still remained in expansion territory. The CME FedWatch Tool shows that the market is pricing in a near 82% probability of a December rate hike, providing bottom support for the US dollar. Scotiabank strategists point out that even with a favorable external environment for risk assets, the Canadian dollar's performance remains weaker than other major non-US dollar currencies. As a low-beta commodity currency, its upward momentum is relatively conservative even in a favorable environment. The market will now focus on US initial jobless claims data, while Friday's non-farm payroll report will be the most important risk event of the week, revising expectations for Federal Reserve policy and dominating the short-term direction of USD/CAD. On the daily chart, USD/CAD has retraced to test the 200-day simple moving average at 1.3893, which also corresponds to the 61.8% Fibonacci retracement level at 1.3947. This level forms a key confluence support, and the price is currently holding above this support, maintaining a short-term bullish bias. If the price breaks below 1.3947, further downside targets are the 78.6% retracement at 1.3852 and the important structural low at 1.3731. Continued selling pressure would significantly weaken the bullish outlook. The first resistance level is the 50% Fibonacci retracement at 1.4013, followed by the 38.2% retracement at 1.4080, and the cycle high at 1.4296. Only a firm hold above 1.4013 will allow the bulls to resume their upward correction. On the 4-hour chart, the price has shifted downwards, and indicators have fallen back to the neutral range, without significant oversold conditions. The market is in a state of flux, influenced by the correlation between the US dollar and crude oil, awaiting a catalyst from US employment data to determine its direction. Editor's Summary : The USD/CAD pair is caught between two forces: a Democratic victory weakening the dollar, while falling oil prices are dragging down the Canadian dollar. Meanwhile, resilient US employment supports expectations of a Fed rate hike, causing the pair to fluctuate around key support levels. The short-term risk is a significantly stronger non-farm payrolls report, which could drive the pair higher to test resistance. A potential opportunity is weaker-than-expected employment data, which could break the confluence of support levels and open up downside potential. Key support levels to watch are 1.3947 and resistance levels are 1.4013. Volatility is expected to increase during the non-farm payrolls window, so the focus should be on waiting for a directional move.