USDCAD is currently hovering within the 1.34800–1.35500 support zone, which has already thrown the pair back up three times. Such a resilience is a sign that there is real buying interest, even if it's not yet obvious. However, technicals aren't alone in telling this story; fundamentals are also lending a hand.
The long-standing negative correlation between USDCAD and oil remains front and center. As one of the world's top crude producers, Canada sees a healthy wave of export revenue every time fuel prices rally. With energy now floating near $110 per barrel, this trend is improving the country's trade balance, filling budget coffers, and stoking demand for the loonie. The knock-on effect? Real pressure on the pair to head lower.
But turn the tables, and the picture flips. Historically, when oil prices drop, USDCAD climbs in response. So, if crude gradually slips back toward $100 per barrel, expect the currency pair to go higher.
Completing the puzzle is the interest rate gap between the two neighbors. The Federal Reserve (Fed) is holding firm at 3.75%, while the Bank of Canada (BoC) stands at 2.25%. This spread in the greenback's favor keeps American assets in the spotlight for carry-trade hunters, adding an extra layer of support for the dollar and ensuring the battle stays far from being one-sided.
The final recommendation:
— Buy USDCAD at the current price, targeting 1.37250 within one month.
— To shield ourselves from adverse market movements, place a Stop Loss order just beneath the support level, namely at 1.35500.
This content is for informational purposes only and is not intended to be investing advice.
