The USD/CAD currency pair rallied to the 1.3970 region, marking its highest level since December 2025 during the first half of the European session, following an intraday dip to the 1.3930 area on Thursday [1]. This surge was primarily driven by a sharp decline in Crude Oil prices, which typically weighs on the commodity-linked Canadian Dollar (CAD) [1]. The downward pressure on oil was attributed to ongoing diplomatic efforts towards a permanent peace deal between the US and Iran, despite renewed hostilities, keeping hopes alive for an end to the over three-month-old war and thus suppressing oil prices [1].
Additionally, the Bank of Canada (BoC) maintained a dovish policy stance, prioritizing economic sluggishness over inflation threats, which further pressured the CAD and supported the USD/CAD pair [1]. The impact of these factors offset a modest downtick in the US Dollar (USD), which followed the release of a soft US Consumer Price Index (CPI) on Wednesday, easing concerns over runaway inflation [1]. Despite this, traders are still pricing in a 70% chance that the US Federal Reserve will raise interest rates by the end of the year, and persistent geopolitical uncertainties in the Middle East continue to provide a tailwind for the USD and the USD/CAD pair [1].
From a technical perspective, USD/CAD remains well above the 200-day Simple Moving Average (SMA), reinforcing a bullish near-term bias and supporting the broader uptrend [1]. Momentum indicators such as the MACD remain positive, suggesting ongoing upside pressure, though the Relative Strength Index (RSI) is in overbought territory near 74, indicating a growing risk of a near-term corrective pullback [1]. Initial support is seen at 1.3968, with deeper pullbacks potentially finding buyers at the 200-day SMA at 1.3816 [1]. As long as the pair holds above this level, the technical structure favors further gains after any consolidation, though overbought conditions may limit immediate bullish follow-through [1].
CONCLUSION
The USD/CAD pair's rally to multi-year highs is underpinned by falling oil prices and a dovish Bank of Canada, despite some easing in US inflation concerns. Technical indicators suggest the uptrend remains intact, though overbought conditions could prompt a short-term pullback. Market sentiment remains bullish for USD/CAD as long as key support levels hold.