USD/CAD extended its advance on Friday, up 0.78% to about 1.4120, after US employment data beat expectations while Canada’s release disappointed. US Nonfarm Payrolls rose by 165K in October versus forecasts for 65K, and the jobless rate eased to 4.1% from 4.2%. September payrolls were revised to 60K from 29K and August to 186K from 133K, adding 84K to prior estimates. Rate pricing shifted: the CME FedWatch tool showed nearly an 80% chance of a 25-basis-point move in December versus around 70% a day earlier, while the DXY gained 0.74% to roughly 102.35.
Canada reported a 4.7K fall in October jobs against expectations for a 13.6K rise, following September’s 68.3K drop; unemployment ticked up to 6.7% from 6.5%. Over three months, the economy has lost 114.7K jobs, and the Bank of Canada’s benchmark increase on 28 October was its first in more than three years. In technical terms, price was at 1.4119, with resistance at the 200-period SMA near 1.4120 and further levels at 1.4130, 1.4150 and 1.4200; supports sat around 1.4070 and the 100-period EMA at 1.4035, while RSI (14) was near 77.
Strategy Amid Divergent Central Bank Policies
In the coming weeks, we should look to capitalize on the widening policy gap between a resilient Federal Reserve and a struggling Bank of Canada. With the relative strength index sitting in overbought territory near 77, chasing the initial rally around 1.4120 carries near-term risk. Instead, derivative traders can wait for minor pullbacks toward the 1.4070 or 1.4035 support zone to establish long positions.
Macroeconomic and Commodity Drivers
The macroeconomic backdrop heavily favors sustained strength in the US Dollar over the Canadian currency. Historically, when two-year government bond yield spreads expand in favor of the US by over 80 basis points, USD/CAD frequently pushes toward multi-year peaks above 1.4200. We can structure long call options or bull call spreads expiring over the next month to capture this upside while strictly defining risk.
Furthermore, weakness in the Canadian labor market—with over 114,000 jobs lost over three months—is compounded by softer commodity demand. Energy exports make up about 20% of Canada’s total merchandise trade, and crude oil prices hovering around the lower $70 range continue to limit any recovery in the Canadian dollar. We recommend maintaining a bullish bias on the pair while placing protective stops or put hedges below the 1.4000 psychological floor.
