- The US dollar initially shot higher against the Canadian dollar on Monday, as the US military actions in Venezuela have caused some jitters.
USD/CAD
The US dollar initially shot higher against the Canadian dollar on Monday, perhaps in reaction to the military operations in Venezuela and the idea that perhaps Canada would not have much in the way of exports to the United States anymore. That being said, the heavy crude oil market is still very much intact in Alberta, so I think that was a bit of an overreaction because, quite frankly, the crude oil coming out of Venezuela will take a while to come to market even if that is the longer-term play.
The pair is essentially trapped in a tug of war as the US dollar is weakening due to Fed rate cuts, pushing the pair down. However, the Canadian dollar has been struggling to take full advantage because oil is so weak. This conflicting dynamic is causing choppiness in the markets that you see at the moment.
Policy Divergence Weighs
Technically speaking, we have a certain amount of resistance at the 1.38 level, which showed itself on Monday. Then you have the 50-day EMA as well as the 200-day EMA indicators above there. The pair recently found a floor just above the 1.36 level, and it is currently bouncing off that floor, but so far, the recovery looks a little lackluster.
The policy divergence between the Federal Reserve having rate cuts three times in 2025 and expected to cut once more in 2026 does have some negativity in this pair, especially as the Bank of Canada is expected to hold steady at 2.25%, resisting further cuts. This is not hawkishness, but it is stability from Canada, and that favors the Canadian dollar. That being said, the oil weakness is a major problem for the Canadian dollar and continues to give hope to the US dollar here.
Trade tensions and potential tariffs remain a background risk that typically supports the US dollar as a haven. And there are a few places that you see that played out more than Canada. Simply put, if we can break above the highs of the trading session on Monday, that would in fact be a very bullish reassertion of momentum.
Ready to trade our USD/CAD daily analysis and forecasts? Here's a list of the best Forex Trading platform in Canada to choose from.