Canadian Dollar down despite soaring Oil Prices: what’s pressuring the CAD?

• Crude Oil Prices near two-week highs amid renewed tensions in the Middle East.
• Recent data show that Canada entered a technical recession after a negative Q1 GDP reading.
• USD/CAD flirts with 1.3900 and trades at its highest in two months.

The Canadian Dollar (CAD) trades with a heavy tone against its American counterpart, as the US Dollar (USD) gathers strength from renewed Middle East concerns. The USD/CAD pair nears 1.3900, its highest in two months.

The USD is back in fashion in a risk-averse environment, triggered by fresh war-related headlines. Concerns returned on news indicating that Iran is dropping attacks on neighboring countries while facing the United States (US) response. United States (US) President Donald Trump tried to pour cold water on the matter, stating that Iran agreed not to have nuclear weapons, but his words fell on stony ground.

The same war is driving Oil prices sharply up, with the barrel of West Texas Intermediate (WTI) changing hands at $94. Given that Canada is the 4th-largest oil producer in the world, higher Oil prices usually strengthen the CAD.

What’s going on?

Canada entered a technical recession after Real Gross Domestic Product (GDP) fell by 0.1% in the first quarter of 2026, following a revised 1% decline in the last quarter of 2025. By definition, a technical recession is defined by two successive quarters of negative economic growth. Three of the last four quarters in Canada have now posted negative real GDP growth.

Does it mean the economy is actually in trouble? The answer is no, not yet. But yeah, the figures are worrisome and require immediate attention. But what kind of “attention” could the matter receive in such an uncertain environment? With the war ongoing and the continuously delayed promise of a peace deal, there’s no foreseeable near-term solution.

USD/CAD Technical Outlook

The near-term picture for USD/CAD is bullish, as the 4-hour chart shows the pair trading above the 20-, 100-, and 200-period Simple Moving Averages (SMAs), with the short-term 20-period SMA at 1.3836 reinforcing nearby trend support. The same chart shows that the Momentum indicator stays well into positive territory, albeit losing upward strength. Finally, the Relative Strength Index (RSI) index hovers in overbought territory near 74, hinting that while the advance is strong, upside risk is increasingly exposed to corrective pullbacks.

As previously noted, initial support is seen at the 20-period SMA around 1.3836, where a shallow dip could find buyers and keep the immediate uptrend intact. A deeper retracement would expose the 100-period SMA near 1.3782 before the broader bullish structure is tested closer to the 200-period SMA at 1.3716. Once above the psychological 1.3900 mark, the pair can extend its advance towards the 1.3950 price zone, while further advances expose 1.3966, the yearly high posted in March.

(The technical analysis of this story was written with the help of an AI tool.)