USDCAD gains strength amid dollar rally and falling oil prices

The USDCAD currency pair is undergoing a slight correction this Wednesday following a sustained upward trend, fueled by a stronger US dollar and America's imposition of trade tariffs on key partners. These measures have boosted demand for the dollar as a safe-haven asset, despite the risks to global trade. Wednesday’s opening price was 1.37213.

Canada’s inflation rate climbed to 1.9% in June, raising the odds that the Bank of Canada (BoC) will pause its monetary easing cycle. The central bank had already lowered interest rates previously, and markets are betting on more easing later this year. This provides support for the Canadian dollar, capping gains for USDCAD.

Meanwhile, US inflation rose 0.3% in June, marking the sharpest increase in five months. The surge was driven by higher prices for imported goods like coffee, furniture, and household appliances, partly due to the impact of tariffs. Still, core inflation remains moderate, reducing the likelihood of aggressive Fed easing in the near term. Investors are now expecting no more than one rate cut by year-end, which supports the US dollar.

Oil prices are a major driver of the Canadian dollar, given the country’s role as a top energy exporter. Currently, crude prices remain under pressure amid fears of a global economic slowdown and rising OPEC+ supply. The drop in oil prices is weighing further on the CAD, pushing USDCAD higher

Technical analysis confirms an uptrend. The price is holding above key moving averages (EMA (20) and EMA (50)), signaling sustained momentum. However, the Stochastic Oscillator is in overbought territory, suggesting a potential short-term correction. Overall, the uptrend is expected to continue, though a minor correction may occur in the near term without significantly altering the broader direction.

Current recommendation:

Buy at the current price. Take profit — 1.37800. Stop loss — 1.36700.