Canadian Dollar advances despite weaker oil prices

• With President Trump ruling out immediate military strikes against Iran, weaker safe-haven demand weighed on the US Dollar, leaving USD/CAD lower.
• Lower crude oil prices, following an easing of Middle East tensions, may weigh on the Canadian Dollar.
• A 90.6% probability of unchanged Fed rates at the 27–28 October meeting is priced into markets.

At around 1.4000 in Monday’s Asian session, USD/CAD is edging lower after opening with a gap higher. Weaker demand for safe havens is weighing on the US Dollar (USD) and pulling the pair down. The shift follows US President Donald Trump’s decision to rule out immediate military action against Iran, stating, “there will not be a strike today,” according to Al Jazeera.

At the same time, Trump’s comments reduced upward pressure on oil prices. That could weigh on the commodity-linked Canadian Dollar (CAD), limiting further losses in USD/CAD.

Canada’s Q3 growth expected to slow as housing remains a drag

Domestic demand continues to face headwinds, according to analysts at Royal Bank of Canada, who note that "housing markets remain weak" ahead of the late-summer data releases. In their view, the August gross domestic product figures, due next Friday, "should confirm that growth slowed in Q3 after surging in Q2," supporting their assessment that economic activity has lost pace following its earlier surge.

The Federal Reserve’s forthcoming policy decision is now in traders’ sights. Expectations broadly favour unchanged interest rates, with another increase potentially following in December. The CME FedWatch Tool puts the market-implied probability of a pause at the 27–28 October policy meeting at 90.6%, while the likelihood of a December rise stands at 79.7%.

Geopolitical and AI risks divide safe-haven flows across currencies

Different shocks are drawing demand towards different G10 currencies, leaving safe-haven flows increasingly fragmented, according to strategists at OCBC. As they put it, “AI jitters favour JPY, Middle East tensions support CAD and NOK, while French fiscal stress benefits CHF,” illustrating how concerns about technology-related growth, regional geopolitical threats and national fiscal pressures are creating separate pockets of defensive positioning in foreign exchange markets.

Technical Analysis: USD/CAD edges lower as bearish bias persists

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

The 50-period EMA at 1.4067 provides the first resistance, with the nine-period EMA nearby at 1.4073. Beyond these, the horizontal level around 1.4300 presents a firmer barrier. Initial support lies at 1.3732, followed by the more distant 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.)