USD/CAD Price Forecast: Gains ground above 1.3600, while bearish technical bias persists

USD/CAD gains momentum to around 1.3635 in Tuesday’s early European session.
The negative outlook of the pair remains intact below the 100-day EMA, with bearish RSI momentum.
The first upside barrier emerges at 1.3760; the initial support level is seen at 1.3560.

Lallalit Srijandorn FXStreet

The USD/CAD pair posts modest gains near 1.3635 during the early European trading hours on Tuesday. Uncertainty over US-Iran peace talks and the closure of the Strait of Hormuz provide some support to a safe-haven currency such as the US Dollar (USD) against the Canadian Dollar (CAD).

US President Donald Trump and his national security team discussed an Iranian peace plan to halt the war and open the Strait of Hormuz while postponing talks on its nuclear program. Nonetheless, White House press secretary Karoline Leavitt told reporters that it remains unclear if Trump will entertain the offer to end the two-month-old war as his bottom-line demands remain the same.

All eyes will be on the US Federal Reserve (Fed) interest rate decision later on Wednesday. The US central bank is widely expected to keep interest rates unchanged at its 3.50%–3.75% target range at its April policy meeting on Wednesday.

Technical Analysis:

In the daily chart, USD/CAD keeps a bearish near-term tone as spot holds below the 100-day Exponential Moving Average (EMA) and the Bollinger Bands’ 20-day Simple Moving Average (SMA). The pair is sliding within the lower half of the Bollinger envelope, while the Relative Strength Index (RSI) at about 36 stays below the neutral 50 line, hinting at persistent downside pressure rather than a confirmed oversold washout.

On the topside, initial resistance emerges at the 100-day EMA around 1.3760, closely followed by the Bollinger 20-day SMA near 1.3767, where a recovery rally would likely face selling interest, with the upper Bollinger band far above near 1.3974 marking a more distant cap. On the downside, the lower Bollinger band at roughly 1.3560 offers the next notable support, and a clear break beneath this floor would open the door to an extension of the current decline.

(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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