The USD/CAD pair retreated slightly after reaching its highest level since March 2020, touching around 1.4465 during the Asian session on Thursday. The pair has temporarily ended a five-day winning streak, with spot prices now hovering around the 1.4430 mark, though a significant correction appears unlikely at this stage.
The US Dollar (USD) entered a bullish consolidation phase following a post-Federal Open Market Committee (FOMC) spike to a two-year high, prompting some profit-taking around the USD/CAD pair, which had reached overbought conditions on the daily chart. Additionally, a rise in Crude Oil prices provided support for the Canadian Dollar (CAD), further putting pressure on the pair. However, several factors continue to favor the USD, limiting the potential for further declines.
Adding to the Canadian Dollar’s challenges, a significant political development emerged this week as Canada’s Deputy Prime Minister and Finance Minister, Chrystia Freeland, resigned. Her resignation, citing disagreements with Prime Minister Justin Trudeau over economic strategy and US tariff threats, compounded the Bank of Canada’s (BoC) already dovish stance and aggressive policy easing. This political instability is expected to weigh on the CAD, offering support to the USD/CAD pair.
Meanwhile, the Federal Reserve’s more hawkish outlook for 2025, signaling a slower pace of rate cuts, continues to push US Treasury bond yields higher. The resulting risk-off sentiment further boosts the safe-haven US Dollar, suggesting a continued short-term appreciation for the currency. A strong follow-through selling is needed to confirm that the USD/CAD pair has reached its peak.
Looking ahead, traders will focus on upcoming US economic data, including the final Q3 GDP print and the usual weekly initial jobless claims, for short-term market direction. Attention will then shift to the US Personal Consumption Expenditures (PCE) Price Index, the Fed‘s preferred inflation gauge, due for release on Friday.
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