USD/CAD nudges higher before Fed-BoC double-header

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USD/CAD climbed 0.33% on Tuesday, settling close to 1.3670 after a steady grind higher off Monday's intraday low near 1.3600.

USD/CAD added 0.33% on Tuesday, recovering near 1.3670 but still trading over 2% below the March peak around 1.3950.
WTI crude surged near $100 per barrel on Tuesday after Trump pushed back on Iran's latest ceasefire proposal.
The BoC was expected to hold rates at 2.25% on Wednesday, with the Fed also seen leaving its range at 3.50% to 3.75%.

USD/CAD climbed 0.33% on Tuesday, settling close to 1.3670 after a steady grind higher off Monday's intraday low near 1.3600. The pair posted a series of higher highs and higher lows through the European and North American sessions, with a brief poke above 1.3690 marking the session peak before a modest pullback into the close. The recovery move keeps USD/CAD more than 2% below the March peak around 1.3950.

The Canadian Dollar drew limited support from a sharp rally in crude oil on Tuesday, with WTI extending gains for a seventh straight session and trading close to $100 per barrel as US President Donald Trump pushed back on Iran's latest ceasefire proposal. Tehran's nuclear programme remains the primary sticking point in negotiations, with the Strait of Hormuz still effectively closed in the ninth week of the conflict and tanker flows through the chokepoint near zero. Tuesday's US Consumer Confidence (Apr) print added little fresh direction ahead of the main event.

Focus now turns to Wednesday's central bank double-header. The Bank of Canada (BoC) is widely expected to leave the overnight rate at 2.25%, with attention on whether the policy statement keeps the door open to tightening after the March meeting flagged renewed inflation risks tied to elevated energy prices. The Federal Reserve (Fed) is also seen holding the federal funds rate range at 3.50% to 3.75% later in the session, extending Chair Powell's wait-and-see stance as the energy shock continues to feed into US inflation. Powell's term expires in May, with Kevin Hassett seen as a potential dovish successor, a factor likely to limit the impact of any hawkish surprise.

USD/CAD 15-minute chart

Technical Analysis

In the fifteen-minute chart, USD/CAD trades at 1.3672. The pair holds a mild bullish intraday bias as price remains comfortably above the day’s open at 1.3615, suggesting dips are still being supported despite the latest consolidation. The Stochastic RSI has retreated toward the lower band after earlier overbought readings, hinting that the recent pullback is more a pause within the short-term advance than a full-fledged reversal.

On the downside, initial support is seen at the intraday pivot area just under the current price, with stronger underlying demand emerging closer to the day’s open near 1.3615. With no nearby technical resistance levels defined on this timeframe, upside progress may be guided more by intraday momentum swings, and a sustained hold above 1.3615 would keep the constructive tone intact while Stochastic RSI unwinds its earlier overbought stretch.

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

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

How do the decisions of the Bank of Canada impact the Canadian Dollar?

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

How does the price of Oil impact the Canadian Dollar?

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

How does inflation data impact the value of the Canadian Dollar?

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

How does economic data influence the value of the Canadian Dollar?

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.