USDCAD may rise amid trade conflicts resolution

USDCAD is still under pressure after reaching a local high in mid-May. Since then, the pair has demonstrated downward dynamics and reached a low of 1.36331 on Thursday of last week. At the time of writing, the quotes are fluctuating around 1.36772.

The Canadian economy is facing internal challenges, such as rising unemployment, which reached 7% in May. However, these negative dynamics are not primarily due to the impact of US tariffs. Canada is taking steps to resolve trade disagreements with the US. The markets view these measures as signals of the countries' rapprochement. These measures could trigger additional CAD strength, especially if an agreement is reached before the G7 meeting on June 15.

The US, on the other hand, is showing relative resilience in the labor market. However, inflation risks remain in focus. According to Bloomberg data, the core CPI likely accelerated to an annualized rate of 2.9% in May, reinforcing expectations of the Fed adopting a wait-and-see approach at the June meeting. Weak inflation expectations, easing trade frictions, and the likelihood of no aggressive monetary loosening by the Fed limit the dollar's upside potential.

The Canadian dollar is receiving support from rising oil prices, which have reached $65 per barrel of West Texas Intermediate (WTI). As the largest energy exporter to the US, Canada directly benefits from a strengthening commodity market. However, conflicting signals for the long-term outlook are emerging from the EIA's forecasts of US production cuts in 2026 and OPEC+ actions to increase supply. Due to the high correlation between the Canadian dollar (CAD) and oil, any fluctuations in oil prices will significantly impact the USDCAD exchange rate.

The technical analysis shows a consolidating market. The price is currently below the EMA(20) and EMA(50) moving averages. A breakdown of the 20 EMA at 1.37599 could accelerate growth to 1.38200. The RSI on the daily chart is holding at 30, which does not suggest an oversold condition. However, the MACD confirms a sustained bearish momentum.

Although the fundamental data remains generally neutral, the USDCAD rate has already factored in most negative expectations. At the same time, the potential for a further decline is limited, as the price has tested an important support level of 1.36337, where sellers' activity has decreased.

Current recommendation:

Buy at the current price. Take profit — 1.38200. Stop loss — 1.36000.