Canadian Dollar loses ground ahead of jobs figures from the US and Canada

• USD/CAD advances towards 1.4050 as Friday’s European session gets under way.
• A cautious market backdrop and demand for safe havens lend support to the US Dollar.
• US and Canadian employment figures due later on Friday keep traders on watch.

With US and Canadian employment figures due later on Friday, markets may adopt a cautious stance ahead of the releases. USD/CAD strengthens to around 1.4050 in early European trading, with the US Dollar (USD) edging up against the Canadian Dollar (CAD) as the sell-off in US equities prompts demand for safe havens.

Control of the Senate and House of Representatives passes from Republicans to Democrats as the latter secure a majority. Tens of millions of voters deliver a sharp rebuke to President Donald Trump, handing Democrats major victories in several Republican strongholds for the first time in decades.

October Nonfarm Payrolls (NFP) are expected to rise by 65,000, compared with September’s gain of 29,000, while economists project that the Unemployment Rate will remain at a very low 4.2%. Traders will scrutinise the US jobs report for further indications of the likely path of US interest rates.

Stronger-than-forecast readings could bolster the argument for US interest rate rises, lending support to the Greenback. Conversely, evidence of a softer US labour market could weigh on the USD in the near term.

Referring to the NFP figures, MUFG analysts said: "Recent data suggests improvement in the labour market, and we expect that to continue with this report,"

In Canada, the consensus forecast points to a modest increase of 13,600 jobs in October, as markets anticipate that the economy will recover some of its losses. The country’s Unemployment Rate is expected to remain unchanged at 6.5% for the month.

Loonie Advances as Scotiabank Warns of Fragile Fundamentals and USD/CAD Support

Despite the Canadian Dollar’s appreciation, Scotiabank analysts observe that “the loonie’s relative performance is somewhat more underwhelming when compared to its peers, and highlights its role as a lower-beta risk and commodity currency.” They nevertheless acknowledge that “the CAD’s strength is notable nonetheless, and threatening to deliver fresh local highs as it retraces its selloff from early September,” while warning that underlying drivers do not fully support the advance.

Highlighting the gap between the currency’s gains and its underlying drivers, Scotiabank says “we are somewhat cautious however, given the renewed CAD-negative widening in US-Canada yield spreads, and note that recent CAD strength has not been confirmed by fundamentals.” Its technical assessment is “bearish/neutral,” with the analysts noting that “the latest decline in USD/CAD looks to be struggling to extend much below the mid-1.39s, and the RSI has steadied in the low 30s.” As for key levels, the bank states that “we continue to look to near-term support in the 1.3900/1.3920 area and see resistance above 1.4000,” adding that “our FV estimate has climbed over the past few sessions and is currently at 1.4119,” which points to some divergence between the spot rate and its fair value model.

Technical Analysis: USD/CAD Remains Neutral in the Near Term

A broadly neutral, range-bound near-term outlook prevails on the daily chart, with USD/CAD trading just above its 100-day simple moving average (SMA) and below the 20-day Bollinger middle band. Following the recent retreat from the upper Bollinger band, price action indicates that the pair is stabilising. A Relative Strength Index (RSI) reading of roughly 49 also signals limited directional conviction, suggesting that neither buyers nor sellers have a clear advantage at present.

The Bollinger middle band, around 1.4065, marks the first resistance level. A daily close above it would pave the way for another test of the upper band near 1.4255. Immediate support lies at the 100-day SMA of 1.4045; a break beneath that level would bring the lower Bollinger band area around 1.3881 into view, where buyers could seek to defend the bottom of the broader trading range.

(The technical analysis of this story was written with the help of an AI tool. Know more.)