USDCAD is now hovering around 1.42228, having hit new 14-month highs. The primary engine behind this rally is a dramatic shift in the Federal Reserve’s (Fed) monetary outlook, which pushed the dollar index (DXY) to yearly peaks.
The loonie, by contrast, is grappling with fundamental headwinds. In May, Canada’s inflation unexpectedly jumped to 3.2%, while core components remained relatively steady. The central bank—chaired by Tiff Macklem—has not yet signaled any policy tightening, citing sluggish economic growth and ongoing uncertainty surrounding the United States–Mexico–Canada Agreement (USMCA).
Another important factor to consider is the Middle East de-escalation. With the Strait of Hormuz reopening, WTI crude slid below $74 per barrel, stripping the Canadian currency of a key pillar of support and widening the yield differential in favor of USD-denominated assets.
However, the market has fully priced in the positive impact of the Fed’s hawkish posture, suggesting that the greenback could correct. Massive profit-taking might be triggered as early as Thursday by the US Core Personal Consumption Expenditures (PCE) data, if inflation shows signs of slowing.
The first round of trilateral USMCA negotiations—due July 1—could also act as a significant headwind for USDCAD, capping its further upside. Positive news on that front would boost demand for the loonie. Taken together, these factors hint at the pair’s correction in the coming sessions.
From a technical standpoint, the rally remains acute. The medium-term outlook still looks bullish. The Moving Average of Oscillator (OsMA), sitting firmly above the neutral line, confirms this scenario. However, the Chaikin Oscillator is declining and forming a bearish divergence with the price. This points to a tangible risk of a correction or a false breakout above the current highs—even though the pair continues to hold near its peak levels.
Consider the following trading strategy:
Sell USDCAD within the 1.42100–1.42250 range. Place Take profit at 1.40900. Set Stop loss at 1.43050.
This forecast remains pertinent between June 24 and July 1, 2026.
This content is for informational purposes only and is not intended to be investing advice.
