USD/CAD steadies as weekly slide extends on Loonie strength

Iran ceasefire talks stalled over the weekend, with the US blockade and the Strait of Hormuz closure both in place.
US ISM Manufacturing PMI held at 52.7 in April, missing the 53.0 consensus, while the Prices Paid index surged to 84.6.
Canada's S&P Global Manufacturing PMI jumped to 53.3 in April from 50.0 in March, returning the sector to expansion.

Joshua Gibson FXStreet

USD/CAD edged higher by less than 0.1% on Friday, recovering from an early-session low near 1.3560 to trade around 1.3590. The pair has shed roughly 0.6% on the week after rolling over from the 1.3700 area mid-week, and momentum has appeared sluggish close to 1.3580 as a cluster of small-bodied candles points to indecision.

The US-Iran conflict and the continued closure of the Strait of Hormuz remain the dominant drivers, keeping crude oil prices elevated and offering tailwinds to the commodity-linked Canadian Dollar. Ceasefire talks stalled over the weekend with both sides hardening their positions, and the US naval blockade of Iranian ports stays in place despite intermittent administration claims of progress that markets have largely discounted.

The US ISM Manufacturing Purchasing Managers Index (PMI) held at 52.7 in April, narrowly missing the 53.0 consensus, while the Employment Index slumped to 46.4 and the Prices Paid component surged to 84.6, the highest reading in over four years. Canada's S&P Global Manufacturing PMI jumped to 53.3 from 50.0 in March, returning the sector to expansion. Markets now look ahead to next Friday's heavy calendar, headlined by US Non-Farm Payrolls (NFP), with consensus pointing to 73K versus 178K previously, and Canadian employment data with the unemployment rate seen unchanged at 6.7%.

USD/CAD 5-minute chart

Technical Analysis

In the five-minute chart, USD/CAD trades at 1.3587, hovering just above the daily open at 1.3580, which now acts as immediate intraday support. The pair has lost upside momentum after earlier gains, while the downward sloping resistance trend line drawn from 1.3680 continues to cap the broader recovery potential. The latest Stochastic RSI reading has retreated toward lower levels, hinting at fading bullish pressure and keeping the near-term tone broadly neutral while price oscillates around the opening level.

On the downside, a clear break back below the 1.3580 daily open would expose softer intraday levels and suggest that sellers are regaining control in the very short term. On the topside, the next meaningful barrier is the descending resistance line coming from 1.3680, and only a sustained move toward that region and a subsequent break higher would start to undermine the broader corrective bias and open the way for a more convincing upside extension.

In the one-hour chart, USD/CAD trades at 1.3589, holding a mildly bearish near-term tone as it remains capped by a downward-sloping trend-line resistance coming in around 1.3680. The lack of nearby moving averages in the dataset keeps the focus on this structural barrier, while the Stochastic RSI has pushed into elevated territory above 70 recently, hinting that upside attempts could face exhaustion below the mentioned trend line.

On the topside, the immediate obstacle is the descending trend-line resistance at 1.3680, and a sustained break above this level would be needed to ease the current bearish pressure and open the way to a stronger recovery. With no clearly defined intraday supports in the provided data, any pullback from current levels would likely see traders looking to prior session lows and intraday swing points below 1.3589 for initial demand, while an inability to challenge 1.3680 would keep the pair vulnerable to further downside probing.

(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

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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