USD/CAD holds near 1.4011 amid weak Canadian GDP and recession fears

In Q2, Canada’s GDP contracted by –1.6% amid the impact of U.S. import tariffs, and analysts doubt that the third quarter will bring meaningful recovery. In August, GDP fell from a revised 0.3% to –0.3% month-on-month, marking the fourth consecutive decline. Both services and goods sectors weakened: manufacturing, which accounts for about 10% of GDP, dropped by –0.5%; oil and gas extraction fell –0.7%; metal production –1.2%; and coal output –5.0%. These figures weigh heavily on the Canadian dollar.

The U.S. dollar is strengthening, with the USD Index (USDX) trading around 99.60 as markets focus on the ongoing U.S. government shutdown and a potential pause in the Fed’s monetary easing cycle in December. After the October 25 bps rate cut, several Fed officials signaled support for keeping rates unchanged, despite dovish remarks from Christopher Waller, one of the main contenders for Fed Chair. Following the recent press conference noting cooling labor-market conditions, the CME FedWatch Tool shows the probability of another rate cut this year falling to 69.3%.

Support and Resistance Levels

On the daily chart, the pair remains below the resistance line of an ascending channel with boundaries at 1.4150–1.3900.

Technical indicators continue to signal buying momentum: the Alligator’s moving averages are widely spread, fast EMAs are positioned above the signal line, and the Awesome Oscillator histogram forms corrective bars slightly above the zero level.

Resistance: 1.4070, 1.4240.
Support: 1.3950, 1.3740.

USD/CAD Trading Scenarios and Outlook

Long positions may be opened after a breakout above 1.4070, targeting 1.4240, with a stop-loss at 1.3980. Timeframe: 7 days or longer.

Short positions may be considered below 1.3950, targeting 1.3740, with a stop-loss at 1.4050.