FX.co ★ Blackpink | USD/CAD

USD/CAD fell again on Wednesday after posting minor gains in the first two days of the week, following a weak US Dollar (USD). Prices fell back to the 1.3955 area early in the European session, seeking to revisit the one-and-a-half-month low seen last Friday amid a negative fundamental environment. The USD Index (DXY), which measures the Greenback's performance against a basket of currencies, fell to more than a month-long low following the US mid-term elections, in which the Democrats won majorities in both the House of Representatives and the Senate. This increased political uncertainty amid worries of fiscal deadlock in the US, which could prevent government spending and, hence, economic growth. Investors sought safe-haven government bonds, pushing US bond yields lower. Moreover, expectations of Iran diplomacy appear to be yet another source of pressure on the Greenback. Indeed, as reported by the Financial Times on Tuesday, US President Donald Trump indicated that the US does not have any plans to attack Iran right away. Meanwhile, a senior Iranian official told Reuters that the Strait of Hormuz will be open only when sanctions are lifted, and the US Navy blockade ends. In addition, Iran's Islamic Revolutionary Guard Corps (IRGC) stated that four tankers were destroyed after hitting mines south of the Strait of Hormuz. That being said, the geopolitical risk premium remains intact and serves as a tailwind for crude oil prices, hence providing support to the Loonie, which is linked to commodity prices. In addition, the Bank of Canada's (BoC) hawkish rate hike, the first since July 2023, provides additional support for the Canadian Dollar (CAD). However, expectations that the US Federal Reserve (Fed) will hike interest rates in December may cap USD selling. Looking ahead, Wednesday's US economic calendar, which includes the ADP private sector jobs report and the ISM services PMI, will be watched for direction later in the North American session. But attention will be on the highly anticipated monthly employment data from the US and Canada, scheduled for release on Friday, which will affect the immediate path of the USD/CAD currency pair. On the fundamentals side, it seems any attempt at a rebound will be bought into. USD/CAD is trading above the 200-day SMA support level at 1.3893 and the 61.8% Fibonacci retracement at 1.3947, suggesting a somewhat favorable short-term outlook. However, any decisive move below the second level will bring strong support at the 78.6% level near 1.3852 and at the structural low near 1.3731. Any subsequent losses will clearly weaken bullish expectations. Meanwhile, some near-term resistances on the upside are located near the 50.0% Fibonacci retracement level at 1.4013, the 38.2% level near 1.4080, and the 23.6% retracement at 1.4163, before the cycle high at 1.4296.