Lower oil prices fail to halt Canadian Dollar gains

• USD/CAD retreats with the US Dollar as safe-haven demand weakens following President Trump’s decision to rule out immediate military strikes against Iran.
• Lower crude oil prices following an easing of Middle East tensions could weigh on the Canadian Dollar.
• 90.6% is the market-implied probability that the Fed will leave rates unchanged at its October 27–28 meeting.

1.4000 is the approximate level for USD/CAD in Monday’s Asian session. The pair has fallen after opening with an upward gap, as reduced demand for safe havens weighs on the US Dollar (USD). US President Donald Trump ruled out immediate military action against Iran, saying, “there will not be a strike today,” according to Al Jazeera.

Trump’s comments also relieved upward pressure on oil prices. That could weigh on the commodity-linked Canadian Dollar (CAD), however, and contain further losses in USD/CAD.

Q3 growth in Canada expected to slow as housing remains weak

Weak housing continues to constrain domestic demand, according to analysts at Royal Bank of Canada. Ahead of the late-summer data releases, they note that "housing markets remain weak". August gross domestic product data, due next Friday, "should confirm that growth slowed in Q3 after surging in Q2," they add. This supports their assessment that economic activity has lost pace after its earlier surge.

90.6% is the probability markets assign to unchanged rates at the October 27–28 policy meeting, according to the CME FedWatch Tool. The implied chance of a December increase stands at 79.7%. With attention shifting to the Federal Reserve’s forthcoming decision, the broad expectation is for rates to remain on hold before a possible further increase in December.

G10 safe-haven flows diverge as geopolitical and AI risks shift

Different shocks are drawing defensive flows into different G10 currencies, according to strategists at OCBC. They describe increasingly fragmented safe-haven demand, noting that “AI jitters favour JPY, Middle East tensions support CAD and NOK, while French fiscal stress benefits CHF,”. Their assessment highlights distinct defensive positions in the FX market, shaped by technology-related growth concerns, regional geopolitical threats and country-specific fiscal risks.

Technical Analysis: 1.4000 USD/CAD retains bearish bias

At 1.4000 on the daily chart, USD/CAD remains below its nine- and 50-period Exponential Moving Averages (EMAs), preserving a bearish near-term outlook. Following a retreat from recent highs, the pair continues to face a ceiling from this short-term EMA cluster. A reading of 37 on the 14-day Relative Strength Index (RSI) places it towards oversold territory, signalling fading bullish momentum rather than a clear reversal.

The 50-period EMA at 1.4067 provides the nearest resistance, just below the nine-period EMA at 1.4073. A more substantial hurdle lies at the horizontal level around 1.4300. Support starts at 1.3732, with a longer-range structural floor at 1.3482. A deeper corrective phase would require a sustained break below these levels.

(The technical analysis of this story was written with the help of an AI tool. Know more.)