Canadian Dollar hits fresh high since June on rising oil prices, Fed-inspired USD weakness

USD/CAD drifts lower for the second straight day amid a combination of negative factors.
Receding Fed-hike bets weigh on the USD, while rising crude oil prices underpin the Loonie.
Geopolitical uncertainties could limit losses for the safe-haven USD and support spot prices.

Haresh Menghani FXStreet

The USD/CAD pair extends the previous day's decline from the top end of the weekly range and attracts follow-through selling for the second straight day. The downward trajectory drags spot prices to a fresh low since June 10, with bears now looking to extend an intraday breakdown momentum below the 1.3900 mark amid a negative fundamental backdrop.

Traders further trimmed their bets for an immediate interest rate hike by the US Federal Reserve (Fed) following the release of a soft Producer Price Index (PPI) report on Thursday. Adding to this, the US Consumer Price Index (CPI) pointed to signs of cooling inflation, which, along with last week's weak US Nonfarm Payrolls (NFP) report, bolstered bets that the US central bank will hold interest rates steady. This keeps the US Dollar (USD) depressed below a two-week high and weighs on the USD/CAD pair.

Meanwhile, supply concerns stemming from the US-Iran standoff over the Strait of Hormuz and the risk of a broader conflict in the Middle East lift crude oil prices. Treasury Secretary Scott Bessent said on Thursday that the US is going to apply measures that have never been seen on Iran, including the continuous blockade of Iranian ports. Moreover, the Iran-backed Houthis in Yemen escalated attacks in the Red Sea and Bab el-Mandeb Strait, and also claimed a drone strike on a Saudi Aramco refinery.

Earlier this week, President Donald Trump again claimed that the US has "total control" over the Strait of Hormuz, while Iran pledged to keep the strategic waterway closed until all its demands are met. This, in turn, acts as a tailwind for crude oil prices, underpinning the commodity-linked Loonie and exerting additional downward pressure on the USD/CAD pair. The downside for the USD, however, seems limited as traders are still pricing in a greater chance of at least one Fed rate hike by the year-end.

This, along with persistent geopolitical uncertainties, could help limit deeper losses for the safe-haven Greenback. The focus now shifts to the US economic docket – featuring the release of monthly Retail Sales data and the Preliminary University of Michigan Consumer Sentiment Index. Apart from this, comments from influential FOMC members will drive the USD. Moreover, developments surrounding the Middle East crisis and oil price dynamics should provide some impetus to the USD/CAD pair.

USD/CAD daily chart

Technical Analysis

The USD/CAD pair turns bearish beneath the 100-day Simple Moving Average (SMA) and the 50.0% Fibonacci retracement of the May-June upswing. This backs the case for further losses to the 61.8% Fibo. retracement at 1.3814, ahead of the 78.6% level at 1.3695 and the structural floor near 1.3544. On the topside, immediate resistance aligns with the 100-day SMA at 1.3920 and the 38.2% Fibonacci level at 1.3980. Further up, the 23.6% retracement at 1.4083 and the cycle high around 1.4249 form a broader resistance band that would need to be overcome to neutralize the current bearish bias.

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

Canadian Dollar Price This week

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies this week. Canadian Dollar was the strongest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.06%	-0.13%	0.97%	-0.39%	-0.07%	0.38%	0.74%
EUR	-0.06%		-0.21%	0.88%	-0.56%	-0.20%	0.22%	0.58%
GBP	0.13%	0.21%		1.03%	-0.35%	0.01%	0.43%	0.77%
JPY	-0.97%	-0.88%	-1.03%		-1.03%	-0.69%	-0.41%	-0.01%
CAD	0.39%	0.56%	0.35%	1.03%		0.35%	0.63%	1.18%
AUD	0.07%	0.20%	-0.01%	0.69%	-0.35%		0.42%	0.75%
NZD	-0.38%	-0.22%	-0.43%	0.41%	-0.63%	-0.42%		0.34%
CHF	-0.74%	-0.58%	-0.77%	0.01%	-1.18%	-0.75%	-0.34%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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