USD/CAD Price Forecast: Bears have the upper hand while below 1.3700 and 200-SMA on H4
- USD/CAD traders seem non-committal at the start of a new week amid a combination of diverging forces.
- Fresh USD selling exerts pressure, though weaker Oil prices undermine the Loonie and lend support.
- The technical setup favors bearish traders and backs the case for a further near-term depreciation.
The USD/CAD pair finds some support near the 1.3645 region on Monday and, for now, seems to have stalled last week's late pullback from the vicinity of the monthly high. Spot prices, however, struggle to gain any meaningful positive traction and trade below the 1.3700 mark through the early European session.
The US Dollar (USD) kicks off the new week on a weaker note and retreats further from its highest level since January as US President Donald Trump's new global tariffs of 15% triggers a fresh wave of the so-called 'sell America' trade. This, in turn, acts as a headwind for the USD/CAD pair. Meanwhile, Crude Oil prices move away from over a six-month high amid concerns about the economic fallout from the trade war and its impact on fuel consumption, which undermines the commodity-linked Loonie and acts as a tailwind for spot prices.
From a technical perspective, the USD/CAD pair has been struggling to find acceptance above the 1.3700 mark, and the repeated failures near the said handle constitute the formation of a bearish double-top pattern on the daily chart. Moreover, the 200-period Simple Moving Average (SMA) on the 4-hour chart slopes lower at 1.3718, reinforcing a downside bias. Spot prices hold beneath this gauge, which caps rebounds as dynamic resistance.
Meanwhile, the Moving Average Convergence Divergence (MACD) line sits below the Signal line near the zero mark, while the histogram deepens in negative territory, suggesting strengthening bearish momentum. The Relative Strength Index (RSI) prints at 49 (neutral), slipping just under its midline and pointing to fading demand. A recovery above the 200-period SMA would ease pressure, while failure to reclaim it would keep sellers in control.
(The technical analysis of this story was written with the help of an AI tool.)
USD/CADA 4-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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