The USDCAD pair’s trajectory continues to be shaped by two key factors: the interest rate gap between the Federal Reserve (Fed) and the Bank of Canada (BoC), along with the state of the commodities market—particularly oil. Over the past week, quotes have traded near annual peaks.
The pair’s main pillar of support remains the strong fundamental picture behind the US dollar. The Fed is determined to maintain its hawkish posture, convincing investors that interest rates will stay higher for longer. This creates a perfect environment for the greenback, which is drawing more and more attention at the expense of commodity-linked currencies like the loonie. And this is not all. The American dollar has a few other tricks up its sleeve: robust macroeconomic data and persistent demand for USD-denominated assets during periods of market uncertainty.
Meanwhile, the loonie is grappling with its own challenges. Energy prices, which had previously been a source of support, turned into another headwind. The Canadian dollar remains highly sensitive to oil cost dynamics. So, when the geopolitical premium faded, bringing back hope for a well-balanced crude market, the loonie lost its ground.
From a technical standpoint, there is a high probability of a further upward move. The pair managed to surpass critical resistance levels at 1.39500 and 1.41500. The next upside target could be 1.45000.
The final recommendation:
— Buy USDCAD at the current price, aiming for 1.45000 within a couple of weeks.
— Place Stop Loss at 1.39500, slightly below support, to manage risks if the market plays against us.
This content is for informational purposes only and is not intended to be investing advice.
