• The Canadian dollar fell after Finance Minister Chrystia Freeland suddenly resigned.

• The loonie fell as oil prices dropped amid demand concerns.

• Data in the previous session showed a sharp improvement in US service sector business activity.

The USD/CAD outlook shows a weakening Canadian dollar after the Finance Minister’s resignation and falling oil prices, while the U.S. dollar stays strong as markets expect fewer Fed rate cuts in 2025.

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The Canadian dollar fell after Finance Minister Chrystia Freeland suddenly resigned, causing political uncertainty. The Minister resigned after clashing with Prime Minister Justin Trudeau on policy. Canada’s economy faces a lot of uncertainty after high interest rates hurt demand. As a result, the Bank of Canada has lowered borrowing costs several times this year, weighing on the loonie. Political uncertainty will only add to the clouded outlook for the economy, further hurting the Canadian dollar. 

At the same time, the loonie fell as oil prices dropped amid demand concerns. Data showed weak consumer spending in China, the largest oil consumer. Poor data from the country dims the outlook for global oil demand. 

Meanwhile, the US dollar held steady after data in the previous session showed a sharp improvement in service sector business activity. The resilient economy has prompted traders to lower bets for Fed rate cuts in the coming year. Nevertheless, markets expect the Fed to cut rates this week. 

USD/CAD key events today

• Canada CPI m/m
• Canada median CPI y/y
• Canada trimmed CPI y/y
• US core retail sales m/m
• US retail sales m/m

USD/CAD technical outlook: RSI indicates stalled bullish momentum

On the technical side, the USD/CAD price has ascended to a new high in the uptrend. The price trades well above the 30-SMA with the RSI near the overbought region. Bulls have been in the lead for a while and recently broke above the 1.4200 key resistance level. The next hurdle is at the 1.4301 key level. 

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However, the RSI has stalled as the price has made new highs, indicating weaker enthusiasm among bulls. Therefore, USD/CAD might struggle to go beyond the 1.4301 key level. At the same time, a bearish divergence would signal a reversal. However, the trend will only reverse if the price breaks below the 30-SMA and the RSI dips below 50.

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