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Summary:

USD/CAD held near 1.4100 after extending its recovery, with traders watching the key 1.4115 resistance level. Safe-haven demand for the US dollar continues to outweigh support for the Canadian dollar from higher crude oil prices. A break above 1.4115 could strengthen bullish momentum, while oil prices and US economic data remain the next major catalysts. The USD/CAD exchange rate traded around 1.4101 on Tuesday after recovering steadily over the past several sessions, as renewed demand for the US dollar continued to offset the Canadian dollar’s traditional support from rising crude oil prices.

The pair has advanced despite Brent crude remaining above $90 per barrel, highlighting how geopolitical uncertainty and expectations for higher US interest rates have become the dominant drivers of currency markets.

Investors are now watching whether USD/CAD can break above 1.4115, a level that could determine whether the pair resumes its broader uptrend.

Why Is USD/CAD Rising Today? The US dollar has regained strength as investors continue to favour safe-haven assets amid escalating tensions between the United States and Iran.

The conflict has pushed oil prices sharply higher, raising concerns that inflation could remain elevated and encouraging expectations that the Federal Reserve may keep interest rates restrictive for longer.

Those expectations have supported US Treasury yields and increased demand for the dollar across the forex market.

Ordinarily, rising oil prices benefit the Canadian dollar because Canada is one of the world’s largest crude exporters. However, the current geopolitical environment has strengthened the US dollar by an even greater margin, allowing USD/CAD to continue climbing despite favourable conditions for the loonie.

How Do Higher Oil Prices Affect USD/CAD? Crude oil remains one of the most important drivers of the Canadian dollar.

When oil prices rise, Canada’s export revenues typically increase, improving the country’s trade balance and supporting the value of the Canadian dollar.

This week, however, that relationship has weakened.

Brent crude has remained above $90 per barrel after threats to shipping through the Strait of Hormuz raised concerns over global energy supplies. Instead of boosting the Canadian dollar, the oil rally has primarily fuelled inflation concerns, strengthening demand for the US dollar and limiting gains for commodity-linked currencies.

As long as geopolitical risks continue driving oil prices higher, the Canadian dollar may struggle to fully benefit from stronger energy markets.

Will USD/CAD Break Above 1.4115? The 1.4115 level has become the key technical hurdle for USD/CAD. ActionForex notes that a decisive move above this resistance would confirm that the recent pullback from 1.4247 has likely ended and increase the probability of another test of that July high.

Conversely, failure to break above 1.4115 could trigger short-term profit-taking after the pair’s recent rally. For now, the broader outlook remains constructive while the pair continues trading comfortably above the 1.3954 support area.

USD/CAD Outlook The short-term USD/CAD outlook remains tilted to the upside while the pair trades just below the key 1.4115 resistance level.

Although elevated oil prices would normally strengthen the Canadian dollar, safe-haven demand for the US dollar and expectations that the Federal Reserve could keep interest rates higher for longer continue to dominate market sentiment.

Whether USD/CAD extends its recovery will likely depend on upcoming US economic data, developments in the Middle East and the direction of crude oil prices. A convincing move above 1.4115 would strengthen the case for another attempt at 1.4247, while renewed strength in the Canadian dollar could limit further gains if oil prices continue climbing.

Why is USD/CAD rising today?

USD/CAD is rising as investors buy the US dollar amid geopolitical uncertainty and expectations that the Federal Reserve may keep interest rates higher for longer. Safe-haven demand has outweighed support for the Canadian dollar from stronger oil prices.

How do oil prices affect USD/CAD?

Higher oil prices usually strengthen the Canadian dollar because Canada is a major oil exporter. A stronger Canadian dollar typically pushes USD/CAD lower. However, during periods of heightened geopolitical risk, the US dollar can outperform despite rising crude prices.

Will USD/CAD break above 1.4115?

The 1.4115 level is the next key resistance for USD/CAD. A sustained break above this level could signal a continuation of the recent recovery and open the door for a retest of the 1.4247 high.

The Canadian dollar was the weakest-performing major currency on Monday after softer-than-expected inflation data reduced expectations of further Bank of Canada policy tightening. Cooling headline and core inflation diminished Canada's relative yield advantage, weighing on the Loonie despite the central bank leaving its policy rate unchanged at 2.25%. Separately, reports that the US and Iran had signed a memorandum aimed at ending the conflict weighed on oil prices, adding further pressure to the oil-sensitive Canadian dollar. The loonie then came under renewed selling late in the US session after Reuters reported that Washington would impose new 50% tariffs on Canadian products.

Source: LSEG

Trump's Tariffs Add to Pressure on the Canadian Dollar The proposed 50% tariffs on Canadian products add a fresh headwind for the loonie by threatening Canada's export outlook and economic growth. Slower growth could reinforce expectations that the Bank of Canada will keep interest rates on hold or even consider easing if the economic impact proves material, reducing the Canadian dollar's yield appeal relative to the US dollar. While the full scope and timing of the tariffs remain uncertain, the announcement was enough to fuel another leg higher in USD/CAD.

USD/CAD Technical Analysis: US Dollar vs Canadian Dollar USD/CAD posted its largest daily gain in 23 sessions, rising 0.5% after finding support at the 50-day EMA and the 1.40 handle, strongly suggesting a swing low may be in place, at least in the near term. It has been just under a month since USD/CAD peaked, and recent developments suggest the pair could extend its rebound towards the 2025 high at 1.4140.

The 1-hour chart shows support has emerged around the weekly pivot point for now, although the sharp momentum shift below ¥116 suggests bears may look to sell into minor pullbacks. A break below 115.31 would bring the 115.00 handle into focus, followed by a key support zone around 114.60 where the monthly and weekly pivot points converge.

Source: ICE, TradingView

CAD/JPY Technical Analysis: Canadian Dollar vs Japanese Yen While crude oil prices didn’t exactly roll over on Monday, they did form doji’s on the daily chart to show indecision. Given but WTI and brent crude have stalled around their respective resistance levels, it removes another pillar of support for CAD/JPY – which is leaving bearish reversal signals of its own.

CAD/JPY formed a notable bearish engulfing candle on Monday to mark its second worst day of the month. Given it formed around 1.16 after a solid bounce, the case for a pullback was arguably growing anyway.

The 1-hour chart shows support has been found around the weekly pivot point for now, though the sharp momentum shift below 116 suggests bears may be seeking to fade into minor pullbacks, A break below 115.31 brings the 115 handle, and tight support zone around 114.6 into focus comprising of the monthly and weekly pivot points.  

Source: ICE, TradingView

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

Commodity-linked currencies strengthened after US inflation data came in weaker than expected. The Consumer Price Index (CPI) slowed to 3.5% year-on-year in June, below the 3.8% forecast, while core inflation eased to 2.6% versus expectations of 2.8%. On a monthly basis, headline CPI unexpectedly fell by 0.4%, while core CPI was unchanged. The moderation in inflationary pressure increased expectations that the Federal Reserve may adopt a more accommodative policy stance, putting pressure on the US dollar and supporting both the Australian and Canadian dollars against the greenback.

However, despite the weaker US dollar, the next move in USD/CAD will largely depend on the Bank of Canada’s policy decision. Later today, the central bank will announce its interest rate decision, publish its updated Monetary Policy Report, and hold a press conference with the Governor. If policymakers maintain a cautiously hawkish tone on inflation, the Canadian dollar could receive additional support. Conversely, a more dovish message may limit CAD gains despite the broader weakness in the US dollar.

Market participants will also focus on the release of the US Producer Price Index (PPI), which will provide further insight into inflation trends following the softer CPI report. In addition, US crude oil inventory data could influence USD/CAD, as oil prices traditionally have a significant impact on the Canadian dollar.

AUD/USD The AUD/USD pair continues to develop the bullish engulfing reversal pattern. Yesterday, buyers managed to test the key resistance level around 0.7000. If the pair secures a sustained break above this level, the rally could extend towards the 0.7080–0.7130 area. The bullish scenario would be invalidated by a move below 0.6900.

Key events for AUD/USD:

Today at 14:00 (GMT+3): US MBA Mortgage Market Index Today at 15:30 (GMT+3): US Producer Price Index (PPI) Today at 15:45 (GMT+3): Speech by FOMC member John Williams

USD/CAD Following confirmation of the bearish tower top reversal pattern, selling pressure on USD/CAD intensified, reinforced by the weaker-than-expected US inflation data. As a result, the pair declined below 1.4100. Technical analysis suggests there is scope for a further move lower towards the 1.3960–1.4020 area. A decisive break back above 1.4120 could revive the bullish outlook.

Key events for USD/CAD:

Today at 16:45 (GMT+3): Bank of Canada interest rate decision Today at 17:30 (GMT+3): US Crude Oil Inventories Today at 17:30 (GMT+3): Bank of Canada press conference

Overall, the weaker US inflation report strengthened expectations of a more accommodative Federal Reserve, weighing on the US dollar and supporting commodity-linked currencies. However, the next moves in AUD/USD and USD/CAD will depend on upcoming economic data and the Bank of Canada’s policy guidance.

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Since the final days of June, the Canadian dollar has been unable to build relevant strength against the U.S. dollar. Now, average USD/CAD movements remain close to 0.2% in the short term, showing a neutral bias that has become evident again in the behavior of both currencies.

For now, CAD has not managed to regain confidence ahead of the employment data release. An additional slowdown in this indicator could keep the Bank of Canada on a neutral policy path, limiting the support from higher rates and making it harder for the Canadian dollar to regain appeal in the short term.

In addition, new updates around the conflict in the Middle East could be key for USD strength. Together, these events could continue to highlight a phase of indecision, or even relevant buying pressure, around USD/CAD over the next few sessions.

What to expect from employment in Canada? Tomorrow’s session is expected to bring the release of Canada’s employment change data. So far, expectations point to a significant decline from the previous reading, with the creation of around 11.2 thousand jobs in June. This figure would come in well below the May reading, which stood near 87.8 thousand jobs created.

Looking at the broader behavior of employment in Canada over the last few months, the data shows a mixed dynamic, with consistent signs of weakness. May was the only month that managed to post a solid figure, but overall, employment data has shown fragility. This trend could be confirmed with tomorrow’s release, especially if the result comes in below expectations, as it would reaffirm a relevant labor market problem in Canada compared to other countries where the slowdown is not as significant.

Source: TradingEconomics

This outlook could be relevant for the Bank of Canada, as weaker employment, or even a reading below expectations, could reduce the need to raise the interest rate, which currently remains around 2.25%. This could lead the central bank to maintain a wait-and-see stance before considering meaningful changes to monetary policy.

In fact, so far, the probability table shows an 88% chance that the interest rate will remain unchanged at the July 15 decision. For the September decision, a probability above 70% has also started to emerge that this dynamic will persist.

Source: Bankofcanadaodds

The employment data release is key. If the report confirms a sharper-than-expected slowdown, expectations for a neutral monetary policy stance from the Bank of Canada could be reinforced over the coming months.

This would limit the appeal of rates in Canada, especially compared to a Federal Reserve that is still approaching scenarios of potential rate hikes. In this context, the differential against the 3.75% rate in the United States could continue to favor USD-denominated investments over those denominated in CAD.

For this reason, a significant decline in employment change could maintain a phase of indecision or even relevant buying pressure in USD/CAD over the next few sessions.

Does the Middle East matter? Another important event to consider is the situation in the Middle East. The latest updates have shown that the United States would be willing to sit down for negotiations, while Trump’s comments continue to point toward maintaining a diplomatic path.

However, an environment of confusion has developed, as during the last 2 sessions a new escalation of the conflict seemed inevitable amid fresh attacks. This has increased doubts over whether a potential peace agreement can take place in the short term.

In this scenario, the behavior of the U.S. dollar is key. The DXY index, which measures the dollar’s strength, showed a relevant increase above the 101-point area in previous sessions as new attacks returned. During the latest session, however, it weakened again amid the relative calm generated by additional comments from the United States.

Source: TradingEconomics

This point is important because, for months, the dollar has been considered a liquidity safe-haven currency during repeated escalations of the conflict. This could become relevant again if no concrete negotiations are seen in the short term.

In that scenario, additional safe-haven demand for the U.S. dollar could appear, making it harder for the Canadian dollar to recover ground in the short term. This could also open the door to relevant buying pressure around USD/CAD over the next few sessions.

Technical outlook for USD/CAD

Source: StoneX, Tradingview

Bullish trend continues to dominate: Since the first days of May, USD/CAD has maintained a relevant bullish trend line. This structure has marked an important buying bias, also reinforced by the bullish crossover of the 50-period moving average above the 200-period moving average, signaling a shift from a bearish structure to a more relevant bullish structure. For now, there is no bearish correction strong enough to put this technical pattern at risk, which is why it remains the most important structure to watch and could continue to dominate movements over the next few sessions.
  RSI: The RSI remains above the 50 level, suggesting that buying momentum has remained relevant over the last 14 sessions. If the indicator continues to hold above the neutral area, this could continue to reflect an important buying bias over the next few sessions.
  TRIX: The TRIX line maintains a bullish slope above its neutral zone, reinforcing the presence of buying strength in long-term exponential moving averages and highlighting the importance of a broad buying bias. However, the curve has also started to flatten steadily, which may be signaling exhaustion in buying strength. This could reflect a relevant phase of indecision over the next few sessions or a possible pause in the buying bias seen in previous weeks.
  Key levels:

1.42604 – Relevant resistance: This important high has not been seen consistently since April 2025 and represents the main short-term bullish barrier. Moves toward this zone would reinforce the current buying bias and could open room for an extension of the bullish trend line over the next few sessions.
  1.41982 – Near-term barrier: This is the most relevant neutral and retracement zone from recent trading sessions. Price movements too close to this level could highlight consistent neutrality and even open room for a possible short-term sideways range.
  1.40813 – Crucial support: This bearish barrier coincides with the area marked by the 23.6% Fibonacci level. Price movements that begin to approach this level could end the bullish trend line and open room for a more dominant selling bias over the coming trading weeks.
  Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25