Oil Prices Range-Bound! USDCAD Set to Break Above 1.37

Summary:

As the impact of rising oil prices becomes increasingly evident, inflation is set to rise to around 3.0%, while core CPI remains relatively stable, providing the Bank of Canada (BoC) with some policy flexibility.

BUY USDCAD

EXP

TRADING

1.36920

Entry Price

1.40000

1.35000

1.36917 +0.00034 +0.02%

0.0

Pips

Flat

1.35000

Exit Price

1.36920

Entry Price

1.40000

Fundamentals

Canada's inflation rate fell to 1.8% in February, down significantly from 2.3% in January and below economists' previous forecast of 1.9%. According to the latest Consumer Price Index report released by Statistics Canada, the temporary GST/HST tax holiday implemented and ended last year has exerted a notable impact on current YoY inflation.

The tax exemption expired on February 15, 2025, when prices of affected goods rose MoM, creating a low base for the YoY calculation in February this year and exerting downward pressure on headline inflation. Excluding this tax factor, CPI rose approximately 1.9% YoY in February.

Despite the slowdown in headline inflation, certain consumer categories maintained robust price gains. Food purchased from restaurants rose 7.8% YoY. Alcoholic beverages from licensed establishments 6.8%. Toys, games and hobbies (excluding video games) 5.4%.

Food purchased from stores rose 4.1% YoY, slowing from 4.8% in January, mainly driven by a smaller increase in prices of fresh or frozen beef. Beef prices rose 13.9% YoY in February, still elevated but down from 18.8% in January.

Statistics Canada noted that despite the recent moderation in gains, grocery prices have surged by more than 30% cumulatively over the past five years. Against this backdrop, markets widely expect the BoC to keep its key overnight rate unchanged at 2.25% at its upcoming interest rate meeting.

The central bank left rates unchanged for the third consecutive meeting on January 28, and economists generally believe policymakers will maintain a wait-and-see stance.

Doug Porter, Chief Economist at BMO Financial Group, stated that rising uncertainty in the global trade environment, coupled with new geopolitical conflicts, has made the BoC more inclined to pause policy adjustments.

He noted that Canada's recent weak employment data, volatile GDP growth over the past few quarters. In addition, uncertainty surrounding the renegotiation of the Canada-United States-Mexico Agreement (CUSMA) all weigh against rate hikes.

In the US, economic data also reflect subdued growth momentum. Fed data show that US manufacturing output rose 0.2% MoM in February, above economists' previous forecast of 0.1%, but slowed markedly from a revised 0.8% in January.

Motor vehicle production rose 1.7%, while output of computers and electronic products, electrical equipment, and household appliances and components also increased. It partly reflects demand driven by AI-related investment and data center construction.

Imports of capital goods hit a record high, with particularly strong demand for computers and telecommunications equipment. Sentiment in the US housing market improved slightly.

The Housing Market Index released by the National Association of Home Builders and Wells Bank rose 1 point to 38 in March, although it remained below the 50 boom-bust line for the 23rd consecutive month.

The improvement in confidence partly reflected lower mortgage rates earlier in the year, when the US government called on Fannie Mae and Freddie Mac to expand purchases of mortgage-backed securities.

However, mortgage rates have risen again recently, as inflation concerns stemming from the Middle East conflict pushed up US Treasury yields, to which mortgage rates are typically tied.

In addition, tariff policies have driven up prices of building materials and household appliances, while intensified US government enforcement against illegal immigration has reduced labor supply in the construction sector.

Housing affordability is emerging as a key US political issue. Robert Dietz, Chief Economist at the National Association of Home Builders, stated that down-payment burdens, uncertainty from rising oil prices, and geopolitical risks are likely to continue weighing on the US housing market recovery in the period ahead.

Overall, both Canada and the US exhibit similar characteristics in their current economic environment: inflation pressures eased notably in early 2026, but rising energy prices driven by geopolitical conflicts are emerging as a new source of risk.

Against a backdrop of weak economic growth, softening labor markets, and rising trade uncertainty, major North American central banks are more likely to maintain a policy pause in the near term rather than adjust rates rapidly.

Technical Analysis

On the 4-hour timeframe for USDCAD, Bollinger Bands are expanding upward with MAs diverging higher, confirming a return to a short-term uptrend. Prices have traded higher along the EMA12 and upper Bollinger Band. The MACD lines are above the zero axis but have formed a death cross, indicating the uptrend remains intact but consolidation is possible.

Resistance lies near the EMA800 (1.38) and psychological level (1.37). The RSI stands at 57, with investors predominantly biased toward buying.

On the daily chart, Bollinger Bands are contracting, while MAs are flat. The MACD has formed a golden cross again, with the lines hovering near the zero axis and downward momentum fading. The bullish divergence signal pointing to an imminent rebound.

Following a strong bullish candle last Friday that broke above the middle Bollinger Band and EMA50, prices are set to retest the EMA200 around 1.38. The RSI is at 55, indicating neutral sentiment, with rising troughs signaling limited downside. Therefore, a strategy of buying on dips is recommended.

Oil Prices Range-Bound! USDCAD Set to Break Above 1.37_1

Oil Prices Range-Bound! USDCAD Set to Break Above 1.37_2

Trade Recommendations

Trade Direction: Buy

Entry Price: 1.368

Target Price: 1.4

Stop Loss: 1.35

Support: 1.35/1.325/1.28

Resistance Levels: 1.38/1.4/1.42

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data

Oil Prices Range-Bound! USDCAD Set to Break Above 1.37

Risk Disclosure