Dollar softens as December Fed cut odds rise; USD/CAD steadies with BoC likely sidelined
The US dollar slipped as traders leaned into a December rate cut, with softer private payrolls and Fed leadership chatter reinforcing dovish bets. USD/CAD held firm as Canada’s resilient data argue for the Bank of Canada to pause, putting near-term focus on US jobless claims and Friday’s Canadian GDP.
Market overview
A broad USD pullback gathered pace after weaker-than-expected ADP employment figures and a media report suggesting Kevin Hassett has emerged as a frontrunner for Fed Chair. The move extends pressure that began after a senior Fed official backed a December cut late last week. Futures now assign roughly a 76% probability to a reduction next month, making a pivot feel close to a foregone conclusion for many macro funds.
With the calendar light ahead of the FOMC, liquidity pockets around weekly jobless claims and ADP revisions may drive FX volatility. However, traders ultimately remain focused on the policy decision and the subsequent high-impact prints—nonfarm payrolls and CPI—which will determine whether the cut path remains a single move or evolves into a more sustained easing cycle.
On the Canadian side, the BoC trimmed rates by 25 bps at the latest meeting, bringing policy to the lower bound of its estimated neutral range (2.25%-3.25%) and signaling a likely pause. A robust labor market and sticky Trimmed Mean CPI near 3% give policymakers cover to sit tight and assess lags, limiting downside in the loonie versus higher-beta peers.
At a glance
- USD weakens after soft ADP and Fed leadership speculation, reinforcing dovish repricing.
- Markets price about a 76% chance of a December Fed cut; attention stays on FOMC, NFP, and CPI.
- Data vacuum until the meeting puts a premium on weekly US jobless claims for near-term direction.
- BoC cut 25 bps and signaled it may be done, barring deterioration in growth or inflation.
- Canada’s jobs strength and Trimmed Mean CPI near 3% support a BoC pause and the CAD.
- USD/CAD key levels: 1.4060 support and rising trendline; resistance in the 1.4130 area; break lower opens 1.3887.
USD/CAD technical picture
Daily timeframe
USD/CAD rebounded from an ascending trendline and pushed toward recent highs. A fresh pullback would likely attract dip buyers at the trendline with tight risk set beneath it, seeking a breakout into new highs. A decisive trendline failure would hand momentum to sellers, exposing the 1.3887 zone.
4-hour timeframe
A minor floor has formed around 1.4060. Bulls are inclined to defend this shelf to keep pressure on the upside targets. A sustained break below 1.4060 would invite a deeper correction toward the major daily trendline for a broader test of trend integrity.
1-hour timeframe
The immediate pullback is guided by a short-term descending trendline. Sellers are leaning against it to press for lower intraday lows, while a clean break above would encourage a run at the 1.4130 resistance area. Intraday ranges may compress into the US Thanksgiving holiday, increasing the risk of stop-and-go price action.
Macro drivers to watch
– US weekly jobless claims arrive today and may jolt the dollar if they break from trend.
– US Thanksgiving on Thursday could sap liquidity, making late-week sessions more rangebound.
– Friday’s Canada GDP is the marquee domestic release and could reset CAD positioning into month-end.
What it means for traders
– The path of least resistance for the USD remains lower if incoming data stay soft and the Fed endorses a December cut.
– For USD/CAD, a BoC on hold and Canada’s sticky core inflation cushion the loonie, but positioning around the 1.4060 pivot and the rising daily trendline remains crucial.
– Expect headline sensitivity and thinner liquidity into the holiday; spreads and slippage risks are elevated around data drops.
Only once: For deeper context on FX positioning and macro catalysts, BPayNews will continue tracking how Fed pricing and Canadian growth momentum interact into year-end.
FAQ
What is driving USD/CAD right now?
Shifting Fed expectations toward a December cut are pressuring the dollar, while a likely BoC pause supported by firm Canadian data underpins the loonie. Near-term moves hinge on US jobless claims and Friday’s Canada GDP.
What are the key USD/CAD technical levels?
Support sits near 1.4060 and along the rising daily trendline. Resistance is clustered around 1.4130. A break below 1.4060 opens downside risk toward 1.3887; above 1.4130 would refocus the highs.
How could US jobless claims affect the dollar?
Higher-than-expected claims would likely reinforce dovish Fed bets and weigh on the USD. A surprise drop could prompt a short-term bounce as markets reassess the probability and pace of near-term cuts.
What is the Bank of Canada’s stance?
The BoC cut rates by 25 bps at its last meeting to the lower end of the neutral range and signaled it may be at the end of the cutting cycle, while leaving the door open for another reduction if conditions worsen.
Which upcoming data will be most market-moving?
Beyond this week’s jobless claims and Canada GDP, the FOMC decision, US nonfarm payrolls, and US CPI are the critical catalysts likely to shape USD direction and USD/CAD volatility into December.
