Canadian Dollar gains despite lower oil prices

USD/CAD depreciates after opening at a bullish gap, trading around 1.4000 during Asian hours on Monday. The pair loses ground as the US Dollar (USD) declines amid easing safe-haven demand, driven by US President Donald Trump ruling out immediate military action against Iran, stating, “there will not be a strike today,” according to Al Jazeera.

However, President Trump’s remarks eased the upside pressure in oil prices, which could put downward pressure on the commodity-linked Canadian Dollar (CAD) and limit the downside of the USD/CAD pair.

Canada growth seen cooling in Q3 as housing drag persists

Analysts at Royal Bank of Canada highlight that domestic demand remains under pressure, noting that "housing markets remain weak" heading into the late-summer data run. They add that the August gross domestic product figures due next Friday "should confirm that growth slowed in Q3 after surging in Q2," reinforcing their view that the economy has shifted down a gear following the earlier burst of activity.

Traders have turned their attention to the upcoming Federal Reserve policy decision. The Fed is widely expected to hold interest rates steady before potentially pursuing another rate hike in December. According to the CME FedWatch Tool, markets are currently pricing in a 90.6% probability of a rate pause at the October 27–28 policy meeting, alongside a 79.7% chance of a hike in December.

Safe-haven demand splinters across currencies as geopolitical and AI risks evolve

Strategists at OCBC observe that safe-haven flows are increasingly fragmented across the G10 complex, with different shocks driving demand for different currencies. They note that “AI jitters favour JPY, Middle East tensions support CAD and NOK, while French fiscal stress benefits CHF,” underscoring how technology-related growth concerns, regional geopolitical risks and country-specific fiscal worries are each shaping distinct pockets of defensive positioning in the FX market.

Technical Analysis: USD/CAD eases amid prevailing bearish bias

In the daily chart, USD/CAD trades at 1.4000, retaining a bearish near-term bias as it holds below both the nine- and 50-period Exponential Moving Averages (EMAs). The pair has retreated from recent highs and remains capped by this short-term EMA cluster, while the 14-day Relative Strength Index (RSI) at 37 leans toward the oversold side, suggesting weakening bullish momentum rather than a decisive reversal.

On the topside, immediate resistance is located at the 50-period EMA at 1.4067, followed closely by the nine-period EMA at 1.4073, with a stronger barrier at the horizontal level near 1.4300. On the downside, initial support emerges at 1.3732 ahead of a more distant structural floor at 1.3482, and only a sustained break beneath these levels would open the door to a deeper corrective phase.