USD/CAD Holds Near Monthly Lows as Oil Boosts Loonie

Traders' Opinions

Summary:

The Canadian Dollar held near one-month highs on Monday as soaring Oil prices continued to support the commodity-linked currency, while a softer US Dollar added further pressure to USD/CAD. Investors now await Canada's inflation report for fresh clues on the Bank of Canada's policy outlook.

SELL USDCAD

Close Time

CLOSED

1.40250

Entry Price

1.38600

1.40650

1.40626 -0.00066 -0.05%

40.0

Pips

Loss

1.38600

1.40650

Exit Price

1.40250

Entry Price

1.40650

The Canadian Dollar remained well supported on Monday, holding close to one-month highs against its US counterpart as higher Oil prices continued to strengthen the outlook for Canada's commodity-linked currency. USD/CAD hovered around the 1.4000 mark after falling roughly 1.25% over the past two weeks, with investors now turning their attention to Canada's latest inflation figures for fresh direction.

Markets expect Canada's annual Consumer Price Index to slow to 2.9% in June from 3.2% previously, while monthly inflation is forecast to decline by 0.2% after May's 1.0% increase. A softer inflation reading would reduce pressure on the Bank of Canada to raise interest rates further. However, investors may look beyond the backward-looking data given the sharp rise in Oil prices since July, which has significantly altered the inflation outlook.

The rally in crude remains the dominant driver behind the Canadian Dollar's recent strength. Oil prices have surged more than 20% since renewed military conflict between the United States and Iran disrupted global energy markets and reignited concerns over supply following the renewed closure of the Strait of Hormuz. As one of the world's largest crude exporters, Canada stands to benefit from stronger export revenues and improved terms of trade, providing continued support for the Loonie.

Meanwhile, the US Dollar remains under pressure after last week's weaker-than-expected US inflation data prompted investors to sharply reduce expectations for near-term Federal Reserve tightening. Softer Consumer and Producer Price Index reports led traders to scale back the probability of a July rate hike while lowering expectations for additional tightening later this year.

The broader bias still favors the Canadian Dollar as long as Oil prices remain elevated. Even if Canada's inflation report comes in softer than expected, the combination of higher energy prices and a less hawkish Federal Reserve is likely to keep USD/CAD under pressure unless geopolitical tensions ease significantly or crude prices begin to retreat.

Technical Analysis

USD/CAD remains firmly entrenched in a bearish structure after decisively breaking below a long-standing ascending trendline. On the 4-hour chart, the pair has transitioned from an uptrend into a sequence of lower highs and lower lows, confirming that sellers have seized control of the broader trend. The sharp rejection from the 1.4140–1.4150 resistance zone accelerated downside momentum, with price now consolidating just above the psychological 1.4000 level.

The former trendline has now turned into dynamic resistance, reinforcing the bearish outlook. As long as USD/CAD remains below the 1.4050–1.4060 supply zone, downside risks are expected to dominate. A decisive break beneath the 1.4000 psychological support would likely trigger another wave of selling, exposing the next major support around 1.3860, which represents the next significant demand area visible on the chart. Failure to hold above that level would confirm a continuation of the broader bearish trend and encourage further downside positioning.

For buyers to regain control, USD/CAD would first need to reclaim the 1.4050–1.4060 resistance area before challenging the stronger barrier at 1.4140–1.4150. Only a sustained move back above these levels would invalidate the current bearish structure and suggest that the recent decline was merely corrective. Until then, rebounds are likely to be viewed as selling opportunities within the prevailing downtrend.

Momentum indicators continue to support the negative outlook. The Relative Strength Index (RSI) is likely hovering below the neutral 50 level, reflecting persistent bearish momentum without yet reaching deeply oversold conditions, leaving room for additional downside. Meanwhile, the Moving Average Convergence Divergence (MACD) remains below the zero line, with bearish momentum still intact, reinforcing expectations that sellers are likely to maintain control unless a meaningful recovery above key resistance levels materializes.

TRADE RECOMMENDATION

SELL USD/CAD

ENTRY PRICE: 1.4025

STOP LOSS: 1.4065

TAKE PROFIT: 1.3860

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

USD/CAD Holds Near Monthly Lows as Oil Boosts Loonie

Technical Analysis

TRADE RECOMMENDATION

Risk Disclosure