Canadian Dollar steps up as US Dollar falters
- The Canadian Dollar rose sharply against the Greenback on Monday.
- USD/CAD is down 0.65% at the outset of another trading week.
USD/CAD is holding a broader bearish structure on the daily chart, trading near 1.3560 after breaking the long-term uptrend from 2021 during 2025. The pair sits well below both the 50-day Exponential Moving Average (EMA) near 1.3787 and the 200-day EMA around 1.3909, confirming sustained downside pressure. A corrective bounce from the January 30 low at 1.3480 carried the pair to resistance near 1.3700 before stalling, and the pair has since consolidated in a range between roughly 1.3600 and 1.3710. The daily Relative Strength Index (RSI) is hovering around 43, below the neutral 50 line, suggesting bearish momentum still has the edge. Friday's close near 1.3660 followed a stronger Canadian jobs report that pulled the unemployment rate down to 6.5%, reinforcing the Bank of Canada's (BoC) cautious stance on further easing and lending some support to the Canadian Dollar.
On the intraday front this Monday, the 1H chart shows USD/CAD breaking down below an ascending channel that formed off the late-January lows, with the pair tumbling through 1.3600 and barreling toward 1.3550. The 1.3680 level is acting as near-term resistance, aligning with a prior horizontal consolidation area and the 78.6% Fibonacci retracement of the recent decline. The Stochastic Oscillator on the 1H is turning lower from the midline area, pointing to fading short-term buying interest. A failure to close back above 1.3600 on the hourly timeframe would keep correction hopes capped and open a path back toward the 1.3500 support zone. Below there, a retest of the 1.3480 swing low comes into focus. To the upside, a sustained break above 1.3700 would target the 55-day EMA near 1.3788, though the pair would need to clear 1.3900 to signal any meaningful shift in the medium-term bearish bias.
USD/CAD 1-hour chart
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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