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USD/CAD Price Forecast: Surging oil prices lift Canadian Dollar

  • The Canadian Dollar capitalizes on surging oil prices.
  • The US Dollar is under pressure ahead of the US PPI and CPI data for August.
  • USD/CAD declines after failing to hold above the 61.8% Fibonacci retracement at 1.3817.

The Canadian Dollar (CAD) trades higher against the US Dollar (USD) on Tuesday. The USD/CAD pair is down 0.25% to near 1.3780 at the time of writing as the Loonie outperforms due to surging oil prices.

Canadian Dollar Price Today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.03%0.02%-0.40%-0.21%0.08%0.29%-0.09%
EUR0.03%0.04%-0.36%-0.14%0.09%0.32%-0.07%
GBP-0.02%-0.04%-0.42%-0.22%0.05%0.28%-0.10%
JPY0.40%0.36%0.42%0.20%0.49%0.71%0.33%
CAD0.21%0.14%0.22%-0.20%0.28%0.51%0.13%
AUD-0.08%-0.09%-0.05%-0.49%-0.28%0.24%-0.16%
NZD-0.29%-0.32%-0.28%-0.71%-0.51%-0.24%-0.39%
CHF0.09%0.07%0.10%-0.33%-0.13%0.16%0.39%

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).

Also as of writing, the WTI Oil price is up around 0.8% to near $91.50. The oil price is close to its over a month high of $92.25, a level that was previously touched also in June 8.

Oil prices have rallied further amid fears of a prolonged energy supply disruption in the wake of the Strait of Hormuz closure.

Higher energy prices bode well for currencies from economies such as Canada, which are net energy exporters.

Meanwhile, the US Dollar is under pressure as investors turn cautious ahead of the United States (US) Producer Price Index (PPI) and the Consumer Price Index (CPI) data for August, which are scheduled for release on Thursday and Friday, respectively.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.11% lower to near 98.80.

USD/CAD Technical Analysis

On the daily chart, USD/CAD trades at 1.3783, keeping a bearish near-term tone as it holds beneath the 20-day Exponential Moving Average (EMA) at 1.3865 and the 61.8% Fibonacci retracement at 1.3817, which is plotted from the May low of 1.3550 to the June high at 1.4248.

The Relative Strength Index (RSI) at about 39 remains below the midline, hinting at persistent downside pressure rather than an oversold extreme, which suggests rallies may continue to be sold while price stays capped under the nearby EMA and retracement barriers.

On the topside, immediate resistance is seen at the 20-day EMA around 1.3865, followed by the 50.0% Fibonacci retracement at 1.3901 and then the 38.2% retracement near 1.3983, with the 23.6% level at 1.4085 acting as a more distant cap if a stronger rebound unfolds. On the downside, initial support emerges at the 78.6% Fibonacci retracement around 1.3701, with a deeper floor located at the 100.0% retracement near 1.3551, where bears would likely reassess the strength of the broader decline.

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

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

Author

Sagar Dua

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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