Over the past 24 to 48 hours, the USD/CAD pair has continued its decline, reaching a five-month low around 1.3675 during Asian trading hours, slightly down from yesterday’s close of 1.36705. The key driver behind the strengthening Canadian dollar is the divergence in monetary policies between the Bank of Canada (BoC) and the Federal Reserve (Fed). While the BoC maintains a relatively steady stance on interest rates, the Fed is increasingly expected to cut rates due to soft US inflation data, weakening the US dollar in the process and boosting the Canadian dollar.

Additionally, rising oil prices have provided further support to the Canadian dollar, as Canada is a major oil exporter. The boost in oil prices directly strengthens Canada’s economic fundamentals, enhancing market confidence in the Loonie. Although US economic data has been decent, questions over its quality have kept the dollar subdued, leading to three consecutive sessions of USD weakness. Overall, downward pressure on USD/CAD has intensified, with market sentiment turning favorably towards CAD, reflecting the combined influence of macroeconomic factors and commodity markets.

For the average investor, this period of USD/CAD volatility highlights the direct impact of diverging central bank policies on currency movements and shows how energy prices can be a major factor in commodity currency trends like the Canadian dollar. This serves as a reminder to investors that monitoring not only economic data but also central bank decisions and oil market developments is crucial for capturing potential trading opportunities.

Daily Chart

The daily chart reveals a sustained downtrend in USDCAD, with price steadily declining below both short-term and long-term moving averages, forming a descending channel. Bollinger Bands are widening, indicating increased volatility and a pronounced trend. The MACD shows a bearish crossover, signaling strong downside momentum. Overall, the longer-term trend remains bearish, with the potential for further downside risk.

1H Chart

The hourly chart over the past 3 to 5 days signals accelerated weakness in USDCAD, where short-term moving averages have sharply crossed below longer-term averages. Price consistently hugs the lower Bollinger Band, supported by MACD and RSI in bearish territory. Recent candlesticks include hammer patterns with long lower wicks indicating possible short-term technical rebounds, though volume remains subdued, suggesting limited strength in any short-term bounce.

Technical Trend:  Trend Direction: Clearly Bearish

Technically, USDCAD remains in a clear downtrend with bearish MACD signals and several consecutive long bearish daily candles confirming strong selling pressure. Recent hammer candlesticks hint at a possible short-term bounce, but absence of volume surge indicates limited upside momentum. Strong support at 1.3600 is critical—breach of this level could accelerate the downward move.

Today’s economic calendar presents limited direct impact on USDCAD. Bank of Japan minutes will be released early local time with negligible influence on the Canadian dollar. The key US event is the weekly jobless claims report at 14:30 GMT+1 (Hong Kong 21:30). A better-than-expected reading may briefly support USD strength; otherwise, downward pressure on the greenback could persist. Overall, technical and fundamental trends are likely to drive price action unless a significant data surprise occurs.

Resistance & Support

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