USD/CAD traded in a tight range on Tuesday as a small pullback in Oil prices and a firmer US Dollar weighed on the Canadian Dollar. The pair was near 1.3619 after an intraday low of 1.3604.
The US Dollar Index was around 98.45 and little changed on the day, with Middle East tensions supporting the currency. USD/CAD has been under downside pressure since early April, while near-term price action has turned choppy.
Key Data And Technical Levels
Markets are waiting for US and Canadian employment data due on Friday, which may shift interest rate expectations. The pair remains below the 20-day Simple Moving Average and the Bollinger Bands mid-line at 1.3697.
The RSI is near 40 and the MACD is negative, with red histogram bars fading. Resistance sits at 1.3697, then 1.3852, with another barrier near 1.4000.
Support lies at the lower Bollinger Band at 1.3543, then 1.3400. Drivers of the Canadian Dollar include Bank of Canada rates, Oil prices, inflation, economic data, and the trade balance.
The Bank of Canada targets inflation at 1–3% and can also use quantitative easing or tightening. Oil is Canada’s biggest export, and higher or lower prices can affect the currency and trade balance.
Policy Divergence And Macro Drivers
Looking back to last year, we saw a bearish outlook for USD/CAD as long as the pair stayed below the 1.3700 level. At that time in 2025, momentum was weakening, and traders were waiting for employment data to make a move. The situation today has changed significantly, with that old resistance level now being tested as new support.
The primary driver has been the divergence between the Bank of Canada and the US Federal Reserve. Recent statements from the Fed suggest they will hold interest rates steady through the summer, while the Bank of Canada has signaled a potential rate cut in June after Canada’s GDP grew by only 0.2% in the first quarter of 2026. This policy difference is putting upward pressure on the USD/CAD exchange rate.
Adding to this pressure, WTI crude oil prices have softened from over $85 a barrel in March to around $78 this past week amid global demand concerns. Furthermore, last Friday’s employment data showed Canada added a meager 5,000 jobs, far below expectations, while the U.S. Non-Farm Payrolls report came in strong at 240,000. These figures reinforce the economic split between the two nations.
Given this context, derivative traders should consider strategies that benefit from a rising USD/CAD. Buying call options with a strike price around 1.3900 for July expiration offers a way to capture potential upside with defined risk. Bull call spreads could also be used to lower the upfront cost of positioning for a gradual grind higher.
The key level to watch is the old 1.3700 resistance area, which we now view as critical support. A sustained break below this level would challenge the current bullish outlook and could be a signal to reduce long exposure. For now, we see dips toward this level as potential buying opportunities.
In the coming weeks, all eyes will be on the upcoming inflation reports from both countries. A hot U.S. CPI print combined with a soft Canadian reading would likely provide the next catalyst to push USD/CAD towards the 1.4000 mark. This is the main event we are positioning for.
