USD/CAD Price Forecast: Trades near 1.3850 after breaking above nine-day EMA
- USD/CAD could test the immediate support at the nine-day EMA of 1.3828.
- The 14-day Relative Strength Index near 46 signals stabilizing yet mild downside pressure.
- The primary barrier lies at the descending channel top near 1.3890.
USD/CAD extends its gains for the third consecutive day, trading around 1.3840 during the Asian hours on Friday. The technical analysis of the daily chart indicates the pair is remaining within the descending channel pattern, signalling a persistent bearish bias.
USD/CAD is maintaining a bearish near-term bias as it holds below the 50-day Exponential Moving Average (EMA). Price clings just above the nine-day EMA, which offers initial dynamic support, while the 14-day Relative Strength Index (RSI) around 46 hints at stabilizing but still modest downside pressure after prior oversold readings.
The USD/CAD pair may test the immediate support at the nine-day EMA of 1.3828. A sustained break below the short-term price average would expose the descending channel bottom at 1.3570, followed by 1.3481, the lowest level since October 2024.
On the upside, the USD/CAD pair may rise toward the primary barrier at the descending channel top near 1.3890, followed by the 50-day EMA of 1.3913. A break above this confluence resistance zone would strengthen the bullish bias and support the pair in exploring the region around the nearly 17-month high of 1.4248, which was recorded on June 24, 2026.
CAD support underpinned by commodities as markets eye US inflation
Strategists at Scotiabank note that underlying market conditions remain relatively calm for now, with “spreads have held relatively steady,” but caution that these could “turn a little more volatile in the next few days as markets react to US inflation data.” They add that “strengthening crude (and firmer commodities in general) do provide some additional lift to Canadian terms of trade,” a positive backdrop they judge is “not perhaps fully reflected in the CAD currently.”
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
What key factors drive the Canadian Dollar?
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
How do the decisions of the Bank of Canada impact the Canadian Dollar?
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
How does the price of Oil impact the Canadian Dollar?
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
How does inflation data impact the value of the Canadian Dollar?
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
How does economic data influence the value of the Canadian Dollar?
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.