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Canadian Dollar weakens despite higher oil prices

  • USD/CAD gains as market risk aversion leaves the Canadian Dollar flat, failing to capitalize on rising crude oil prices.
  • WTI rises as Middle East supply fears grew after Iran fired unsuccessful ballistic missiles at Kuwait and Bahrain.
  • US Dollar strengthens as the Strait of Hormuz closure raises energy prices and inflation, keeping Fed rates higher for longer.

USD/CAD edges higher after posting minor losses in the previous day, trading around 1.3850 during the Asian hours on Wednesday. The commodity-linked Canadian Dollar (CAD) fails to capitalize on rising crude oil prices as intensifying market risk aversion prompts trader caution, keeping the currency flat.

West Texas Intermediate (WTI) climbed for a third consecutive session, trading near $92.60 per barrel at the time of writing. This price surge follows a fresh escalation of hostilities in the Middle East, where Iran launched ballistic missiles toward neighboring Kuwait and Bahrain. According to ABC News, US Central Command (CENTCOM) successfully intercepted the missile and drone attacks while executing self-defense strikes on Iran’s Qeshm Island.

The threat of a prolonged closure of the Strait of Hormuz has stoked fears of a broader energy supply disruption, which could drive global inflationary pressures higher. This backdrop strongly reinforces expectations that the Federal Reserve (Fed) will maintain elevated interest rates for an extended period, supporting the US Dollar (USD). This higher-for-longer monetary outlook is heavily supported by a resilient US economy, highlighted by the May 2026 ISM Manufacturing PMI jumping to 54.0 from 52.7, beating forecasts to mark the strongest factory expansion since May 2022.

Further evidence of economic strength appeared in the labor market, where April JOLTS data showed job openings surging to a nearly two-year high of 7.61 million alongside declining layoffs. With robust manufacturing and employment data complicating the inflation outlook, investors are now anxiously awaiting Friday’s Nonfarm Payrolls report for definitive clues on the future trajectory of Fed policy.

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CAD weakens as firmer USD counter recovering Oil prices

  • USD/CAD gains positive traction for the second straight day amid a pickup in the USD demand.
  • Geopolitical uncertainty and hawkish Fed bets continue to act as a tailwind for the Greenback.
  • Rebounding Oil prices offset dismal Canadian GDP, underpinning the Loonie and capping gains.

The USD/CAD pair attracts some buyers for the second consecutive day and reclaims the 1.3800 mark during the Asian session on Monday. Spot prices, however, lack bullish conviction and remain below the highest level since April 13, near the 1.3870 region, touched last week amid a combination of diverging forces.

The uncertainty over US-Iran talks to end a three-month-old conflict and Israel’s incursion into Lebanon keeps geopolitical risk in play, underpinning the safe-haven US Dollar (USD) and acting as a tailwind for the USD/CAD pair. In fact, differences over Iran’s nuclear program and the Strait of Hormuz continue to complicate efforts to reach a deal. Moreover, Iran’s chief negotiator, Mohammad Bagher Qalibaf, stated that the country will not accept any agreement until its national rights are fully secured.

Adding to this, reports suggest that the US has hardened its negotiating position with Iran. This, along with bets that the US Federal Reserve (Fed) will hike interest rates by the end of this year, assists the USD to build on Friday’s modest bounce from a two-week low. The Canadian Dollar (CAD), on the other hand, is undermined by dismal domestic GDP figures, which showed that the economy contracted at 0.1% annualized pace in the first quarter of 2026, and further supports the USD/CAD pair.

Meanwhile, the latest development surrounding the Middle East crisis triggers a goodish recovery in Crude Oil prices, from over a one-month low touched on Friday. This, in turn, helps limit the downside for the commodity-linked Loonie and might keep a lid on any further appreciating move for the USD/CAD pair. Hence, it will be prudent to wait for strong follow-through buying before positioning for the resumption of the recent well-established uptrend witnessed over the past month or so.

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Sharp drop of the CAD; Canadian GDP data spooked investors

The Canadian economy contracted by 0.1% in Q1 2026 , while the market had expected growth of as much as +1.5%. On a month-over-month basis, March saw a decline of 0.1% m/m (est. 0.0%), and annual GDP growth was a mere 0.4% y/y compared to the expected 0.9%. The data confirms that the Canadian economy is increasingly feeling the effects of the trade war with the US—exports are slowing sharply, and consumption is not making up for the losses. This opens the door to further rate cuts by the Bank of Canada, which had already signaled caution. CAD under heavy pressure — USDCAD has skyrocketed.

Source: xStation

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USD/CAD Price Trades below 1.3800 with bullish bias on weak Oil, USD uptick

  • USD/CAD stalls the previous day’s sharp retracement slide from its highest level since April 13.
  • Weaker Oil prices undermine the Loonie and support spot prices amid a modest USD uptick.
  • The technical setup favors bulls, warranting some caution before positioning for further losses.

The USD/CAD pair attracts some dip-buyers during the Asian session on Friday, stalling the previous day’s sharp retracement slide from the 1.3870 region, or the highest level since April 13. Spot prices, however, lack follow-through and remain below the 1.3800 mark, warranting caution before positioning for the resumption of the monthly uptrend amid mixed signals over a potential US-Iran peace deal.

Axios, citing two US officials, reported that the US and Iran have reached a draft agreement to extend the ongoing ceasefire for 60 days. The optimism, in turn, keeps Crude Oil prices depressed close to an over a one-month low touched on Thursday, which is seen undermining the commodity-linked Loonie and acting as a tailwind for the USD/CAD pair. Meanwhile, the US and Iran remain at odds over key issues, including Tehran’s nuclear program and the Strait of Hormuz. This keeps the enthusiasm under check, which, along with bets that the US Federal Reserve (Fed) will hike rates by the end of this year, helps revive the US Dollar (USD) demand and further supports spot prices.

From a technical perspective, the overnight downfall dragged the USD/CAD pair below the 23.6% Fibonacci retracement level of the recent upswing from the monthly low. However, momentum indicators are holding a constructive bullish bias and back the topside tilt. Furthermore, the Relative Strength Index (RSI) is hovering near 57, and Moving Average Convergence Divergence (MACD) is in positive territory, hinting that buyers still retain control while spot prices stay above the 38.2% Fibo. support near mid-1.3700s. If a deeper pullback unfolds, spot prices could find decent support around 1.3720-1.3700 confluence – comprising the 50% Fibo. and the 100-day Simple Moving Average (SMA).

On the topside, momentum back above the 23.6% retracement at 1.3797 would open the door toward the overnight swing high, near 1.3872. This is followed by the 1.3900 round figure and the 1.3930-1.3940 supply zone, which, if cleared decisively, should pave the way for an extension of the month-to-date uptrend.

(The technical analysis of this story was written with the help of an AI tool.)

USD/CAD daily chart

Chart Analysis USD/CAD

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Euro.

USDEURGBPJPYCADAUDNZDCHF
USD0.11%0.06%0.05%0.03%0.02%-0.40%0.03%
EUR-0.11%-0.05%-0.04%-0.07%-0.07%-0.47%-0.08%
GBP-0.06%0.05%0.00%-0.04%-0.03%-0.43%-0.02%
JPY-0.05%0.04%0.00%-0.01%-0.03%-0.46%-0.03%
CAD-0.03%0.07%0.04%0.00%-0.02%-0.42%-0.00%
AUD-0.02%0.07%0.03%0.03%0.02%-0.40%0.01%
NZD0.40%0.47%0.43%0.46%0.42%0.40%0.42%
CHF-0.03%0.08%0.02%0.03%0.00%-0.01%-0.42%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

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Canadian Dollar: Rebalancing offers near-term relief – BNY

Geoff Yu at BNY highlights that Canadian Dollar (CAD) dynamics differ from the U.S., with equity-based rebalancing pointing toward CAD support as growth and allocation trends move opposite to the US Dollar. Fixed income steepening and poor CAD performance are seen amplifying CAD buying signals, suggesting some relief for the Canadian Dollar into month-end.

Canadian Dollar supported by flows

“Mathematically, our figures suggest that the unwinding of USD/CAD hedges – the discontinuation of forward USD selling against CAD on U.S. positions – played a big role in the dollar’s performance and some reversion is needed.”

“The only other equity-based rebalancing signal is in the CAD, where growth and asset allocation trends are pointing in the opposite direction.”

“In contrast, CAD buying is being amplified by similar steepening in bond markets on top of poor currency performance.”

“USD and CAD have again generated the same net selling and buying signals, though the dollar’s signal is far weaker, as poor bond performance offset dollar purchases. In contrast, CAD buying is being amplified by similar steepening in bond markets on top of poor currency performance.”

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Canadian Dollar gains ground amid hopes of a deal to reopen the ​Strait of Hormuz

  • USD/CAD weakens to near 1.3805 in Monday’s early European session. 
  • The US Secretary of State said, “Either reach a good deal with Iran or handle it differently.” 
  • Cooling domestic inflation and economic weakness in Canada might cap the Canadian Dollar’s upside.  

The USD/CAD pair edges lower to around 1.3805 during the early European session on Monday. The US Dollar (USD) softens against the Canadian Dollar (CAD) after US officials signal progress on a peace deal with Iran. Trading volumes are expected to be light due to a market closure for Memorial Day in the US. 

Reuters reported on Monday that US Secretary of State Marco Rubio said that the US will give diplomacy every chance on Iran but will pursue other means if a good deal cannot be reached while describing the current framework as solid. Rubio stated that a deal to end the war with Iran is still possible on Monday. 

On Sunday, US President Donald Trump said that Washington and Iran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of ‌Hormuz. 

Although global oil prices remain elevated, the commodity-linked Loonie failed to capitalize. Concerns over underlying domestic economic growth could offset typical commodity-driven tailwinds.

Traders brace for the US Personal Consumption Expenditures (PCE) Price Index report on Thursday for fresh impetus. In case of hotter-than-projected outcomes, this could underpin the Greenback against the CAD in the near term. 

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Currency Talk – EUR/USD, USD/CHF, USD/CAD

Key takeaways

  • What is the technical outlook for EURUSD, USDCHF and USDCAD?

EURUSD EURUSD prices have recently broken below the 1:1 uptrend, whose lower boundary was at 1.1650. According to the Overbalance methodology, this paves the way for the downtrend to extend, potentially as far as the low at 1.1420. Conversely, for a return to an uptrend, the price would first need to move back above the 1.1650 level, and ideally also break through the 1.1720 level, where the upper limit of the local 1:1 downtrend pattern is located.

EURUSD – H4 chart. Source: xStation USDCHF The USDCHF remains in a long-term downtrend. The price rebounded from a key resistance level at the end of March, leading to a decline of nearly 300 pips. Currently, attention should be paid to a local descending geometric pattern, for which resistance is at the 0.7914 level. Should this level be breached, the price could continue to rise towards the next resistance level at 0.8035. Only a sustained break above this higher level would suggest a shift in the balance of power on the chart. For the time being, however, the base case scenario remains a downtrend.

USDCHF – H4 chart. Source: xStation USDCAD The USDCAD pair shifted sentiment at the start of May, and since then we have seen a local uptrend, supported by a green 1:1 bullish pattern. Should a correction occur, the key support level remains at 1.3723. A break below this level could open the way for a decline towards 1.3630, where the polarity of the previously negated bearish pattern, marked in red, is located.

USDCAD – H4 timeframe. Source: xStation

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CAD hangs near one-month low vs bullish USD; rising Oil prices limit losses

  • USD/CAD stands firm near one-month top amid sustained USD buying interest.
  • Fed rate hike bets and geopolitical tensions benefit the USD’s safe-haven status.
  • Rising Oil prices underpin the Loonie and cap any further upside for spot prices.

The USD/CAD pair trades with a positive bias above mid-1.3700s during the Asian session on Monday, though it remains below a one-month top touched last Friday. A sustained US Dollar (USD) buying interest acts as a tailwind for spot prices while rising Crude Oil prices underpin the commodity-linked Loonie and cap further gains.

In a post on Truth Social, US President Donald Trump warned Iran on Sunday that the “clock is ticking” and that there “won’t be anything left” if action is not taken soon, adding that “time is of the essence.” Adding to this, the Times of Israel reported that Israel and the US are actively advancing military preparations to potentially resume coordinated attacks against Iran. This raises the risk of a further escalation of tensions in the Middle East, which, along with the effective closure of the Strait of Hormuz, lifts Crude Oil prices to a two-week high.

Meanwhile, elevated energy prices continue to fuel inflationary concerns and bolster market expectations for a more hawkish US Federal Reserve (Fed). In fact, the CME Group’s FedWatch Tool indicates that traders are currently pricing in over a 50% chance of a Fed rate hike by the end of this year. Apart from this, persistent geopolitical uncertainties lift the safe-haven USD to its highest level since April 7, offsetting the negative factors and supporting the USD/CAD pair. This, in turn, favors bulls and backs the case for further appreciation.

Moving ahead, there isn’t any relevant market-moving economic data due for release on Monday, either from the US or Canada. That said, fresh developments surrounding the Middle East crisis might continue to infuse volatility in the financial markets and drive Crude Oil prices. Furthermore, the USD price dynamics should contribute to producing short-term trading opportunities around the USD/CAD pair. The aforementioned fundamental backdrop, however, suggests that the path of least resistance for spot prices remains to the upside.