USD/CAD Slips as Oil Boosts Canadian Dollar

Traders' Opinions

Summary:

USD/CAD eased from a one-week high as a softer US Dollar and higher oil prices supported the Canadian Dollar. However, expectations of further Federal Reserve tightening, soft Canadian inflation, and US tariffs on Canadian goods continue to limit downside momentum.

SELL USDCAD

EXP

TRADING

1.40600

Entry Price

1.38200

1.42500

1.41063 -0.00029 -0.02%

0.0

Pips

Flat

1.38200

Exit Price

1.40600

Entry Price

1.42500

The Canadian Dollar strengthened on Tuesday, pulling USD/CAD lower as firm oil prices and a softer US Dollar outweighed concerns surrounding Canada's economic outlook. The pair retreated from a one-week high after renewed optimism that Washington and Tehran could still pursue a diplomatic solution reduced demand for the Greenback, prompting traders to trim recent safe-haven positions.

US Secretary of State Marco Rubio reiterated that the US remains open to negotiations with Iran, although he stressed that any agreement must include changes to Tehran's actions in the Strait of Hormuz. Despite the diplomatic tone, continued military confrontations and Houthi threats against Saudi shipping have kept global energy markets on edge, supporting crude oil prices and providing an additional tailwind for the commodity-linked Canadian Dollar.

USD/CAD remains caught between two competing forces. Elevated oil prices continue to support the Loonie, while expectations that the Federal Reserve could still raise interest rates before year-end, combined with soft Canadian inflation and new US tariffs on Canadian goods, should limit the pair's downside. Unless crude extends its rally significantly, USD/CAD is likely to remain supported near the 1.4000 psychological level despite the current pullback.

Technical Analysis

USD/CAD remains entrenched in a well-defined bearish structure after breaking below the ascending trendline that had supported the pair since May. On the 4-hour chart, prices continue to print lower highs and lower lows, reinforcing the prevailing downtrend. The recent rebound toward the 1.4070-1.4080 resistance zone appears corrective in nature and has so far failed to alter the broader bearish outlook. As long as sellers continue to defend this area, downside pressure is expected to remain dominant.

The 1.4050-1.4080 region now represents the first layer of resistance and remains critical for the near-term outlook. A sustained move above this barrier would ease immediate selling pressure and could trigger a recovery toward the 1.4140-1.4150 resistance zone, where previous support has turned into resistance. However, unless buyers reclaim that level decisively, rallies are likely to be viewed as selling opportunities within the broader downtrend.

On the downside, bearish traders remain focused on a clean break below the recent swing low around 1.4000. A sustained move beneath this psychological level would confirm a continuation of the prevailing bearish trend and expose the 1.3820 support zone, which represents the next major downside target highlighted by the broader market structure. A break below that region would reinforce bearish momentum and signal the potential for an even deeper decline.

Momentum indicators continue to favour sellers despite the latest recovery attempt. The Relative Strength Index (RSI) is likely hovering near the neutral 50 mark after rebounding from oversold territory, suggesting that bearish momentum has cooled but remains intact. Meanwhile, the Moving Average Convergence Divergence (MACD) is attempting to recover but remains below the zero line, indicating that upside momentum is still limited and the broader trend continues to favour the bears.

TRADE RECOMMENDATION

SELL USD/CAD

ENTRY PRICE: 1.4060

STOP LOSS: 1.4250

TAKE PROFIT: 1.3820

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