Canadian Dollar tumbles as Greenback resurgence picks up speed

• The Canadian Dollar hit six-month lows against the US Dollar on Thursday.
• Loonie losses picked up speed as markets pivot into the safe haven US Dollar.
• US government shutdown woes are eating away at global risk appetite.

The Canadian Dollar (CAD) shed weight at an accelerating pace on Thursday, falling over one-half of one percent against the US Dollar (USD) amid a broad-market uptick in Greenback demand. FX markets are seeing an across-the-board pivot into picking up the US Dollar, leaving the already-struggling Loonie in the dust.

The US government's funding-based shutdown is stretching into its ninth straight day. Investors initially brushed off the closure of US federal services last week. Now, a clear lack of forward progress by US lawmakers to re-fund the government is weighing on broad-market sentiment, sparking a sharp uptick in risk-off safe-haven flows and buoying the Greenback.

Daily digest market movers: Canadian Dollar stumbles over rising Greenback demand

• The Canadian Dollar fell over 0.5% against the US Dollar on Thursday, hitting a 26-week low.
• The Loonie has been steadily losing ground against the US Dollar since mid-June, falling 3.65% top-to-bottom.
• The US government remains split down party lines over key healthcare funding budget items, and the US Senate is mired in political gridlock, making a quick resolution to the lack of a federal budget an increasingly unlikely outcome.
• Key Canadian labor and wages data is due on Friday. Loonie traders will be looking for a recovery in Net Change in Employment figures, while the Unemployment Rate is expected to tick up to 7.2%.
• With the US government in shutdown mode, official data sources have dried up, forcing markets to rely on more volatile and inconsistent private data.
• Friday brings the latest University of Michigan Consumer Sentiment Index, as well as updated 1-year and 5-year Consumer Inflation Expectations.

Canadian Dollar price forecast

USD/CAD extended its recent rally, with the pair now trading near 1.4025 after breaking through the key 1.4000 level. The move marks a decisive shift in daily structure, as price has pushed above both the 50-day and 200-day Exponential Moving Averages (EMA), now clustered around 1.3850 and 1.3870, respectively. That area has flipped from resistance to potential support, signaling a meaningful shift in market sentiment toward the U.S. dollar.

From a price action standpoint, the trend remains constructive, with a clear pattern of higher highs and higher lows since August. The breakout above 1.4000 likely cleared resting liquidity, opening the door for a push toward the March swing high near 1.4450. However, the Relative Strength Index (RSI) reading at 70 suggests momentum is running hot, which could lead to some short-term profit taking or consolidation before another leg higher. If the pair can hold above the 1.3900-1.3950 zone, the broader bias stays bullish, while a close back below that area would hint at a deeper pullback toward 1.3800.

USD/CAD daily chart