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The U.S. dollar has just taken a breather, and the Canadian dollar has shown its sharp sword: the bloody battle at the 1.40 mark has begun!
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Hello everyone, todayXM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: The US dollar has just taken a breather, and the Canadian dollar has shown its sword: the bloody battle at the 1.40 mark has begun!". Hope this helps you! The original content is as follows:
On Tuesday (November 11), the US dollar against the Canadian dollar was trading below 1.4050 in early European trading. News that the U.S. government shutdown is expected to end has marginally supported the U.S. dollar; previously impressive employment data for the Canadian dollar has suppressed the upside of the exchange rate, leaving the market still in a xmxyly.combination of "bullish trend + cooling momentum."
Fundamentals
1) Shutdown progress and dollar pulse: The U.S. Senate passed a revised temporary appropriation bill and advanced it to the House of Representatives. If passed by both houses and eventually signed by the president, the federal department will restart. The news itself reduced institutional uncertainty and triggered a slight "stabilization after risk premium retreat" in the US dollar. At the same time, after the shutdown is lifted, delayed macro data will be reissued intensively, and the US dollar will face an increase in volatility caused by an information-intensive period, rather than a one-way drive.
2) The Federal Reserve’s path and “data threshold”: The Federal Reserve’s October meeting has made it clear that cutting interest rates is a risk management orientation, and the December resolution will continue to rely on data. Current derivatives pricing shows that the probability of an interest rate cut in December is 62.4%. This means that any signal pointing to a slowdown in labor demand is likely to increase "expectations for further reductions", thereby suppressing the US dollar interest rate premium and conversely benefiting the Canadian dollar; conversely, if the data is more resilient than expected, the exchange rate will test the upper resistance cluster.
3) Constraints on the Canadian side: Statistics Canada announced last week that the unemployment rate dropped from 7.1% to 6.9% in October, better than the 7.1% expectation; employment increased by 66,600 for two consecutive monthsGrowth beyond expectations. On the margin, this provides endogenous support for the Canadian dollar and inhibits the continued rise of the US dollar against the Canadian dollar. Some institutions believe that the cumulative 275 basis points of interest rate cuts that have been implemented will take time to be transmitted, and the Bank of Canada has more reason to "wait and see", which reduces the urgency of easing again in the short term. Surveys of market participants show that most expect the policy rate to remain at 2.25% until at least mid-2027, and some believe it may be cut again in early 2026 if the external environment worsens. The above differences will continue to be transmitted to the exchange rate through interest rate differentials and expected fluctuations.
Summary: The fundamentals are a tug of war between “marginal stabilization of the U.S. dollar vs. endogenous resilience of the Canadian dollar.” Directional catalysts focus on the reissue of US data and labor clues, and the rhythm depends on the dynamic balance of interest rate spreads and risk appetite.
Technical aspect:
The daily K-line chart shows that the exchange rate is slowly rising along the ascending channel, and the upper track of the channel corresponds to the recent high of 1.4139; the retracement lows are seen in turn at 1.3629, 1.3725 and 1.3887, showing the trend continuation characteristics of "step-like raising of lows". The current price of 1.4035 is in the middle area of the channel, which has not yet destroyed the main trend, but the kinetic energy cooling signal has appeared:
MACD indicators: DIFF=0.0030, DEA=0.0033, MACD=-0.0005. DIFF is slightly lower than DEA, with a slight dead cross, and the histogram turns negative, suggesting that short-term momentum has entered the mean reversion stage, closer to "consolidation/retracement" than "acceleration upward".
Relative Strength Index (RSI14): RSI=54.4780, which is above the central axis but far from overheated, and is neutral to bullish. This mutually confirms that the price is still within the upward channel structure.
Price structure and key levels:
The first level of concern is the integer mark 1.40, which overlaps with the historical transaction intensive area near the center line of the channel to form dynamic support;
The secondary support is towards 1.388 7 (the retracement low of the previous period), if it falls below, it will open a stepped support sequence pointing to 1.3725 and 1.3629;
The upper resistance will first be around 1.4100, followed by the upper edge resistance of the channel and the previous high of 1.4139. If there is an effective breakthrough and the histogram turns positive again and the RSI crosses 60, the volume that can be defined as the trend can expand again.
Pattern interpretation: The current trend can be regarded as an attempt to restart after a technical retracement in the upward channel; before the MACD dead cross is repaired, there is insufficient momentum to chase the increase, and it is more like a "time for space" arrangement. As long as 1.40 is not effectively broken below, trend trading will still prevail; conversely, if the closing price falls below and the subsequent backtest fails, the probability of turning into a box in the short term will increase.
Outlook
Scenario 1: Mildly bullish (probability depends on U.S. employment cues)
If ADP and subsequent intensive data indicate that labor demand is acceptable, and the probability of an interest rate cut in December (62.4%) falls, the interest rate differential and nominal yield will increase against the US dollar.Enhanced support. In terms of price, 1.4100 will become the immediate testing level; after breaking through, it will point to 1.4139. If the MACD histogram turns positive and expands, and the RSI crosses 60 and stabilizes, the upper edge of the channel may be broken upward, and the target shifts to the higher Fibonacci extension zone.
Scenario 2: Bearish retracement (pay attention to the morphological validity of 1.40)
If the U.S. employment clues weaken, or the supplementary data after the shutdown shows that demand has significantly cooled down, the market will revise upward the Fed's interest rate cut path, and the U.S. dollar interest rate premium will be under pressure. If the 1.40 line is effectively penetrated by the closing level and the backtest fails, the daily line will transform from the "rising channel" to the "high sideways or box", and the price center of gravity will fall back to 1.3887; if it falls again, it will drop in steps to 1.3725 and 1.3629. Under this path, the continuation of the MACD dead cross and the "negative expansion" of the histogram will provide technical confirmation, and the RSI falling back below 50 will become one of the signals of the trend turning point.
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