USD/CAD Price Forecast: Flat lines below 1.3700, while remaining below key 100-day EMA

USD/CAD holds steady near 1.3675 in Monday’s early European session.
The pair keeps the bearish vibe below the key 100-day EMA.
The immediate resistance level emerges at 1.3738; the initial support level is seen at 1.3665.

Lallalit Srijandorn FXStreet

The USD/CAD pair trades on a flat note around 1.3675 during the early European trading hours on Monday. The US April Nonfarm Payrolls (NFP) report exceeded expectations, which could provide some support for the US Dollar (USD) against the Canadian Dollar (CAD).

The US economy added 115,000 jobs in April, versus the 185,000 increase (revised from 178,000) in March, the Bureau of Labor Statistics reported on Friday. This figure surpassed the estimations of 62,000 by a wide margin. Meanwhile, the Unemployment Rate held steady at 4.3% in April, in line with the market consensus.

On the other hand, rising crude oil prices after US President Donald Trump rejected Iran’s counteroffer to end the war with the US and Israel could underpin the commodity-linked Loonie. It is worth noting that Canada is a major oil-exporting country, and higher crude oil prices generally have a positive impact on the Canadian Dollar (CAD).

Israeli Prime Minister Benjamin Netanyahu warned on Sunday that the conflict with Iran was “not over,” raising fears that tensions in the Middle East could escalate again and further threaten energy supplies.

Technical Analysis:

In the daily chart, USD/CAD holds below the 100-day Exponential Moving Average (EMA), keeping the broader tone mildly bearish despite the recent bounce from last week’s lows. Price is trading just above the 20-day Bollinger middle band, suggesting a tentative attempt to stabilize, while the Relative Strength Index around 48 remains broadly neutral and hints at consolidative rather than impulsive momentum for now.

On the topside, initial resistance is defined by the 100-day EMA at 1.3738, with the Bollinger upper band near 1.3756 reinforcing a nearby supply zone that needs to give way to ease downside pressure. On the downside, the 20-day Bollinger middle band at 1.3665 offers immediate support ahead of the lower Bollinger band around 1.3575, where a break would likely re-open the path toward a deeper corrective slide.

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

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

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.

How do the decisions of the Bank of Canada impact 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.

How does the price of Oil impact the Canadian Dollar?

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.

How does inflation data impact the value of the Canadian Dollar?

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.

How does economic data influence the value of 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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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