USD/CAD was little changed, with lower oil prices offsetting improved risk appetite. The Canadian Dollar saw limited lift from earlier crude gains during the US/Iran conflict.
Lower energy prices may affect the Canadian Dollar if the oil fall is sustained. A sustained drop in oil could reduce concerns about Bank of Canada policy tightening later this year if inflation pressures stay elevated.
Bank Of Canada Senate Briefing
Bank of Canada Governor Macklem and Senior Deputy Governor Rogers are due to brief the Senate Banking Committee on the economy and outlook. Their message is expected to align with remarks delivered earlier in the week to the House of Commons finance committee.
Short-term technical indicators keep the near-term spot downtrend in place for USD/CAD. Resistance is noted at 1.3625/30 and 1.3720, with a downside target towards firm support in the low 1.35 zone.
The US dollar is showing weakness, and we feel minor rallies are an opportunity to sell. Resistance for the USD/CAD is holding around the 1.3625 level, making the short-term trend for the dollar look bearish. Our focus remains on a potential slide for the currency pair towards the low 1.35 zone.
This view is supported even with softer energy prices, as WTI crude futures have slipped to around $78 a barrel, down from over $85 last month. We see this having a limited negative effect on the Canadian dollar, especially as Canada’s latest inflation reading came in at 2.8%. This persistent inflation keeps the Bank of Canada from easing its policy, providing some underlying support for the CAD.
Oil Inflation And Us Dollar Focus
When we look back at the market volatility during the US/Iran conflict in late 2025, we saw that even a significant surge in crude oil failed to provide a major, lasting boost to the CAD. This historical performance suggests the Canadian dollar’s current value is more influenced by broad US dollar trends than by moderate swings in oil prices. Therefore, the current weakness in the greenback is the more important factor for us to watch.
Given this outlook, we believe traders could consider buying USD/CAD put options with strike prices near 1.3550, set to expire in the coming weeks. A more conservative strategy might involve setting up bear call spreads, selling calls at the 1.3625 resistance to capitalize on the expectation that the US dollar will fail to rally past that point. These positions would align with the view that the path of least resistance for the pair is downwards.
