USD/CAD Price Forecast: Edges higher above 1.3600, but bearish bias persists below 100-day EMA
- USD/CAD posts modest gains near 1.3635 in Thursday’s early European session.
- The negative outlook of the pair remains intact below the key 100-day EMA, with bearish RSI momentum.
- The first upside barrier emerges at 1.3678; the initial support level is seen at 1.3548.
The USD/CAD pair trades with mild gains around 1.3635 during the early European trading hours on Thursday. Hopes for a US-Iran peace deal to end the war drag crude oil prices lower, weighing on the commodity-linked Canadian Dollar (CAD) against the US Dollar (USD).
US President Donald Trump said on Wednesday that he had “very good talks” with Iran, adding that “it’s very possible we’ll make a deal.” Meanwhile, Iran’s Foreign Ministry spokesman, Esmaeil Baghaei, stated that a US proposal to end the war is still “under review," and Tehran will convey its response to mediator Pakistan after "finalizing its views.”
Technical Analysis:
In the daily chart, USD/CAD keeps a bearish near-term tone as spot holds beneath the 20-period simple moving average (SMA) and the 100-period exponential moving average (EMA) near 1.3740. Price is consolidating in the lower half of the recent Bollinger envelope, while the Relative Strength Index (14) at about 42 suggests waning downside momentum but not yet an oversold condition.
On the topside, initial resistance is aligned with the Bollinger midline at 1.3678, followed by the 100-period EMA at 1.3740, with a stronger cap emerging near the upper Bollinger band around 1.3808. On the downside, the next notable support sits at the lower Bollinger band around 1.3548, where a clear break would open the way to deeper losses, while holding above this floor would keep the pair in a corrective range under the cited moving averages.
(The technical analysis of this story was written with the help of an AI tool.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
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