|

USD/CAD Price Forecast: Softens below 1.3750, 100-day EMA caps its upside

  • USD/CAD posts modest losses around 1.3730 in Thursday’s early European session. 
  • The pair turns mildly bullish in the near term as RSI momentum holds above the midline. 
  • The upside barrier emerges at 1.3750; the initial support level to watch is 1.3680. 

The USD/CAD pair trades on a softer note near 1.3730 during the early European session on Thursday. Surging oil prices due to escalating Middle East tensions provide some support to the commodity-linked Loonie against the US Dollar (USD).

The Bank of Canada (BoC) held the overnight interest rate steady at 2.25% on Wednesday. This is the third consecutive time the rate has remained unchanged since it was lowered to this level in October 2025.

BoC Governor Tiff Macklem said during the press conference that the war in Iran has added "a new layer of uncertainty" against that backdrop, and Canada is facing even more volatility than before. He added that the central bank will look through immediate oil-driven inflation for now but is prepared to act if these costs lead to persistent and broader inflation. 

The US Federal Reserve (Fed) on Wednesday decided to maintain its target range for the federal funds rate at 3.50-3.75%, as widely expected. Fed policymakers signaled a quarter of a percentage point rate cut by the end of this year, a view that on the surface was unchanged from their last set of projections in December.

Chart Analysis USD/CAD

Technical Analysis:

In the daily chart, the near-term bias of USD/CAD turns mildly bullish as price rebounds from last week’s lows and pushes back toward the upper half of the recent range, while remaining below the gently descending 100-day EMA near 1.3750, which still caps the broader uptrend. The latest Bollinger structure shows spot holding above the middle band around 1.37 and edging toward the upper band near 1.38, signalling recovering upside momentum after a period of compressed volatility. RSI has climbed back toward 58 from sub-40 readings, confirming strengthening bullish pressure without yet reaching overbought territory.

Initial resistance stands at 1.3750, where the 100-day EMA converges with the upper Bollinger Band, and a daily close above this area would open the way toward 1.3830 and then 1.3900. On the downside, immediate support is at 1.3680 around the middle Bollinger Band, followed by 1.3640, with a break below exposing the lower band and recent floor near 1.3580.  

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

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.

Author

Lallalit Srijandorn

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.

More from Lallalit Srijandorn
Share:

Editor's Picks

AUD/USD: Rebound remains capped by 0.6900 after China inflation data

AUD/USD holds the rebound below 0.6900 in the Asian session on Monday. Mixed China's inflation data for October fails to provide any inspiration to the Chinese proxy, the Australian Dollar, keeping the upswing limited. Reduced US-Iran tensions weigh on the US Dollar and fuel the bounce in the Aussie pair.

USD/JPY retreat in sync with USD, appraches 158.00

USD/JPY is back in the red at the start of the week on Monday, eyeing the broad US Dollar retreat amid easing US-Iran tensions. Traders also resorting to profit-taking following the blockbuster US Nonfarm Payrolls data-led rally. US CPI report is next in focus.

Gold bounces back above $4,100 amid easing Iran risks

Gold price recovers some lost ground and regains $4,100 during the Asian trading hours on Monday. Speculations that incoming Democrats would push to end the Iran war lift the yellow metal amid latest comments from US President Donald Trump that new strikes on Iran are unlikely if talks progress.



Weekly forecast: A resilient US Dollar faces its next big test?
The US Dollar (USD) weathered the post-US midterm election results better than expected, adding to the previous week’s bullish move and managing to keep the trade above the key 102.00 barrier on the US Dollar Index (DXY).
AI selloff: What bonds and credit markets reveal
The recent selloff in US technology stocks has left investors with a difficult question. Are we simply looking at a correction after months of strong performance, or is the market starting to reflect deeper problems in the economy? The Nasdaq 100 has lost as much as 16.3% from its record high, while the Philadelphia Semiconductor Index has experienced an even sharper decline.
US Dollar breaks below 101.50 as Democrats sweep Congress
The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.