The USD/CAD pair gathers strength to near 1.3690 during the early European trading hours on Thursday. Expectation of a slower pace for US Federal Reserve (Fed) rate cuts as Kevin Warsh is to succeed Jerome Powell as Fed Chair in May 2026 supports the US Dollar (USD) against the Canadian Dollar (CAD). Financial markets are pricing in nearly a 90% odds that the Fed will hold interest rates steady at its March policy meeting, with anticipation of a total of 50 to 75 basis points (bps) in easing by the end of the year.
Meanwhile, rising geopolitical risks could boost crude oil prices and provide some support to the commodity-linked Loonie. It is worth noting that Canada is a major oil-exporting country, and high crude oil prices generally have a positive impact on the CAD.
Technical Analysis:
In the daily chart, USD/CAD remains capped below the 100-EMA. The average slopes lower, preserving a bearish bias. RSI at 46 (neutral) has ticked higher, indicating momentum is stabilizing. Bollinger Bands tilt lower, and price trades beneath the middle band, reflecting persistent bearish pressure. Should bulls reclaim 1.3750, advances would face the 100-EMA at 1.3813 and the upper band at 1.4012, while a fresh slide would expose 1.3490.
(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.
Source: https://www.fxstreet.com/news/usd-cad-price-forecast-keeps-bearish-vibe-under-the-100-day-ema-below-13700-202602050708
