CAD dragged lower on risk aversion

The Canadian Dollar (CAD) backslid into long-term averages against the US Dollar on Monday, with markets opening up the new trading week notably on the back foot. Investors pulled back into the safety of the Greenback, sending the Canadian Dollar skidding into three-week lows.

Meaningful economic data from Canada remains entirely absent from the economic data docket this week, at least until fresh prints in Canadian labor data, due on Friday. Canadian Trade Balance figures are due on Tuesday but are almost guaranteed to have little to no market impact.Daily digest market moversRising risk-off sentiment pummels the CAD on Monday.Markets are facing a lower forecast for the pace of rate cuts than many expected earlier in the year.

Odds of further outsized rate cuts from the Fed are evaporating as the US labour market remains stubbornly healthy. Fed remains tepid on further rate cuts, bets of no rate change in November are on the rise.

USD/CAD is currently trading at 1.36245, having recently bounced from the 1.3500 level. Notably, price action has moved above the 200-day Exponential Moving Average (EMA), a critical level that often signals a shift in trend direction when breached.

The break above this longer-term EMA suggests that bullish momentum may be gaining traction, and this level could act as a new support zone.Additionally, the 50-day EMA is slightly below the current price, further reinforcing the bullish outlook. The crossing above both the 50-day and 200-day EMAs in quick succession strengthens the case for a potential rally in the coming days, assuming no significant pullback occurs.