• USD/CAD retains its bullish bias amid the emergence of some USD dip-buying on Monday.
• Geopolitical uncertainties offset Friday’s weak US NFP report and support the Greenback.
• A dovish BoC and softer crude oil prices undermine the Loonie, further supporting the pair.

The USD/CAD pair holds steady above mid-1.4200s during the Asian session on Monday, trading near its highest level since April 2025, set last week. Moreover, the supportive fundamental backdrop seems tilted in favor of bulls and backs the case for an extension of the recent well-established uptrend witnessed over the past month or so.

The initial market reaction to Friday’s weak US Nonfarm Payrolls (NFP) report turned out to be short-lived as traders are still pricing in over an 80% chance that the Federal Reserve (Fed) will hike interest rates by the end of this year. Adding to this, persistent geopolitical uncertainties stemming from the Middle East conflict and the widening Russia-Ukraine war revive demand for the safe-haven US Dollar (USD) at the start of a new week, validating the positive outlook for the USD/CAD pair.

In the latest developments, the head of Yemen’s governing body, Rashad al-Alimi, has ‌announced the start of military operations to retake the remaining territory held by the Houthis in the country. Moreover, Iran’s Foreign Minister Abbas Araghchi said that there is no military solution to the conflict with the US, but Tehran remains ready to return to war. Furthermore, Iranian parliament speaker Mohammad Bagher Ghalibaf said that the Strait of Hormuz will not be opened until our conditions are met.

Meanwhile, Ukraine reported deadly Russian air strikes on the Kyiv region, Kharkiv, and Dnipro. In response, Ukrainian President Volodymyr Zelenskyy said in a post on X that Russia will definitely face a response to this, keeping the geopolitical risk premium in play and offering some support to the Greenback. Adding to this, a weaker tone surrounding crude oil prices is seen as undermining the commodity-linked Loonie and turning out to be another factor acting as a tailwind for the USD/CAD pair.

The Canadian Dollar (CAD) could further continue with its relative underperformance amid the Bank of Canada’s (BoC) predominantly dovish policy stance and US-Canada trade tensions. This, in turn, suggests that the path of least resistance for the currency pair remains to the upside, though overbought conditions on short-term charts might hold back traders from placing fresh bullish bets on the USD/CAD pair. Meanwhile, any corrective pullback is more likely to be bought into and remain cushioned.

USD/CAD daily chart

Technical Analysis

Last week’s breakout through the previous year-to-date highs, around the 1.4245-1.4250 zone, was seen as a fresh trigger for bullish traders and backs the case for a move towards reclaiming the 1.4300 mark. On the flip side, any corrective pullback now seems to find decent support near Friday’s swing low, around the 1.4200 round figure. A convincing break below, however, might prompt some technical selling and drag the USD/CAD pair to the 1.4150-1.4145 region.