The Canadian dollar benefits from the Bank of Canada's (BOC) hawkish signals, indicating the end of the rate-cutting cycle. BOC Governor Tiff Macklem stated on Wednesday that the current interest rate level is appropriate and supportive of economic growth through structural transformation. This stance diverges sharply from that of the Federal Reserve and underscores the negative outlook for the USDCAD currency pair. Meanwhile, crude oil prices plummeted to their lowest levels since October 21, potentially curbing further gains in the commodity-linked Canadian dollar and helping to limit its depreciation. Data released on Thursday showed that Canada recorded a trade surplus of CAD153 million in September, significantly surpassing market expectations of a trade deficit. This marked Canada's first monthly trade surplus since January 2025 and elevated the U.S.-Canada trade balance to its highest level of the year. Statistics Canada reported a 6.3% increase in total exports for the month, reaching CAD64.23 billion, reversing August’s 3.2% decline. Out of 11 major product categories, 9 experienced export growth, with metal and non-metal mineral products, as well as aircraft and transportation equipment and parts, each increasing by over 20%. In physical terms, September exports grew by 4.1%, while imports declined by 4.1%, totaling CAD64.08 billion.

U.S. Department of Labor data indicates that initial unemployment claims increased by 44,000 to a total of 236,000 last week, marking the largest single-week rise since July 2021. Despite the uptick, the four-week moving average slightly rose to 216,750, suggesting that the labor market remains broadly stable. Analysts interpret this spike as primarily driven by seasonal fluctuations typical at year-end rather than a sign of significant weakness in employment conditions. Recent layoffs have not notably impacted initial claims, partly because affected employees may still be receiving severance benefits or have found alternative employment. The Federal Reserve has recently cut interest rates by 25 basis points, lowering the target range to 3.50%–3.75%, and acknowledges downside risks to the labor market, though employment remains resilient. The third-quarter trade deficit narrowed to US$52.8 billion, the lowest since 2020, driven partly by export growth. The Atlanta Fed projects annualized GDP growth of 3.5% for the third quarter, despite delays in official statistics due to Congressional shutdowns. Looking ahead, the Federal Reserve maintains an optimistic outlook for the U.S. economy through 2026, expecting economic growth to rise to 2.3%, inflation to decline to 2.4%, and the unemployment rate to stabilize around 4.4%. Chair Powell indicated that productivity gains related to artificial intelligence will support economic resilience in the future. Despite ongoing concerns over inflation and housing affordability, the Fed hints at a potential pause in rate cuts in the near term, maintaining a cautious monetary policy stance.

In the 1D timeframe, the price has broken below the EMA200 and is moving along the lower Bollinger Band, indicating a high probability of further decline towards the previous low around 1.373. Following a MACD death cross, both the MACD line and signal line have fallen below the zero-axis, signaling a transition into a bearish trend. The RSI is at 28, entering oversold territory, suggesting the short-term downtrend is ongoing. In the 1M timeframe, Bollinger Bands are converging narrowly, and SMAs are tightening. After the MACD death cross, the MACD line and signal line are attempting to re-cross the zero-axis but remain some distance away, implying the correction phase is still in progress. Support levels are identified near the EMA50 and the lower Bollinger Band at approximately 1.362 and 1.32, respectively. The RSI stands at 49, reflecting a market in a state of neutrality awaiting further direction. Therefore, it is recommended to go short before going long.

Trading Direction: Buy

Entry Price: 1.37

Target Price: 1.42

Stop Loss: 1.357

Support: 1.373, 1.37, 1.357

Resistance: 1.414, 1.42, 1.44