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Oversold RSI Triggers Potential Uptrend Resumption
Central Bank
Economic
Summary:
This signals that selling pressure is becoming exhausted, increasing the probability that bulls are ready to regain control.
Buy
TradingUSDCAD
EXP
1.39856
Entry Price
1.40550
TP
1.39500
SL
1.39966 +0.00107 +0.08%
0
Point
Flat
1.39500
SL
CLOSING
1.39856
Entry Price
1.40550
TP
The latest labor market data from the U.S. continues to show signs of deceleration. The ADP report indicated that U.S. private payrolls recorded a weekly average decline of 2,500 in the four weeks leading up to November 1st, a notable improvement from the steeper 11,250 average loss observed in the preceding period. Separately, August Factory Orders expanded by 1.4% month-over-month (MoM), which met consensus estimates and successfully reversed the 1.3% contraction recorded in July.
Federal Reserve Governor Christopher Waller adopted a distinctly dovish tone on Tuesday, characterizing the U.S. labor market as "weak" and "near stalling speed." He suggested that the current restrictive policy appears to be dampening economic activity and reiterated his view that a 25 basis point (bps) rate cut at the December 9-10 meeting would provide "additional assurance" for the stability of the labor market.
In a move addressing inflationary pressures, President Donald Trump reversed previously imposed tariffs on over 200 consumer products, including coffee, bananas, and orange juice. This decision was reportedly motivated by an acknowledgment of the inflationary impact resulting from increased import costs, and it followed a series of political victories for Democratic candidates in recent local elections. Despite the economic rationale, the immediate market reaction to this tariff news proved to be marginal.
Meanwhile, commentary from other Federal Reserve officials remains divergent. Vice Chair Philip Jefferson offered cautious, slightly dovish remarks on Monday, acknowledging growing risks to employment and a gradual cooling in the labor market. His perspective contrasted with the more hawkish messaging delivered by other Fed officials. Jefferson underscored the need for policymakers to proceed with caution as interest rates approach the estimated neutral level. Conversely, Kansas City Fed President Jeffery Schmid stated that monetary policy should actively "counter demand growth," arguing that the current Fed stance is "moderately restrictive," which he views as appropriate. St. Louis Fed President Alberto Musalem echoed the need for caution, suggesting that rates are now closer to neutral than restrictive and emphasizing the limited scope to ease policy without risking an overly accommodative stance.
Across the border, Canada's persistent inflation backdrop supports the Bank of Canada (BoC)'s guidance that it may be finished with its easing cycle. In October, headline CPI slowed to 2.2% year-over-year (YoY) from 2.4% in September, primarily reflecting lower gasoline prices (the BoC’s Q4 forecast was 2.0%).
However, excluding volatile food and energy components, the CPI rose to an eight-month high of 2.7% YoY from 2.4% in September. Furthermore, the BoC’s core CPI measure (the average of trimmed and median CPI) printed at 2.95% YoY (consensus: 3.00%), consistently above the 2% target. Market pricing currently implies a stable BoC policy rate of 2.25% over the next 12 months, with rate hikes expected over the following two years.
Technical Analysis
The USDCAD pair recently dipped to a local low of 1.3972 before swiftly recovering above the key support level at 1.3985. This 1.3985 level is highly significant, as the price has historically demonstrated strong bullish reactions from this area on multiple occasions. Should this pattern repeat, a renewed upward impulse may initiate from these current levels. This outlook is significantly strengthened by the Relative Strength Index (RSI), which dropped sharply to the 19 level, entering a clearly oversold zone. This signals that selling pressure is becoming exhausted, increasing the probability that bulls are ready to regain control.
On the 1-hour chart, the 100-period and 200-period Moving Averages (MAs) are closely grouped at 1.4022 and 1.4032, respectively. In the event of a renewed bullish impulse, the price could quickly recapture these MAs and target the recent local high of 1.4055. Conversely, a decisive breakdown below the 1.3985 support level would invalidate the current bullish setup and open the path for a deeper bearish continuation.
Trading Recommendations
Trading direction: Buy
Entry price: 1.3985
Target price: 1.4055
Stop loss: 1.3950
Validity: Nov 28, 2025 15:00:00
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