USD/CAD slides below 1.3800 as Crude Oil surge and soft Greenback lift the Loonie

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USD/CAD slipped around 0.4% on Monday, falling to session lows near 1.3790 as the Canadian Dollar gained ground on surging Crude Oil prices and broad US Dollar softness.

WTI crude surged above $105 after President Trump announced a US blockade of the Strait of Hormuz.
The Canadian Dollar headed into a second gaining week, lifted by elevated Crude Oil and broad US Dollar weakness.
Tuesday's US PPI for March will capture the opening stages of war-driven energy cost increases.

USD/CAD slipped around 0.4% on Monday, falling to session lows near 1.3790 as the Canadian Dollar gained ground on surging Crude Oil prices and broad US Dollar softness. The pair opened soft and extended its decline through the session, breaking below the 1.3840 area and printing a fresh weekly low. Price has now given back most of its gains from the early April spike toward 1.3950, with a second consecutive weekly decline taking shape.

West Texas Intermediate (WTI) crude surged as much as 9% to above $105 per barrel on Monday after President Trump announced a US blockade of the Strait of Hormuz, following the collapse of weekend negotiations between the US and Iran in Pakistan. The key shipping route has been effectively closed since the conflict began in late February, and despite persistent market expectations that a resolution will eventually emerge, the goalposts on a peace deal continue to shift.

Elevated energy prices are providing a tailwind for the commodity-linked Canadian Dollar, even as the Bank of Canada (BoC) held its overnight rate at 2.25% in March and flagged uncertainty about the conflict's impact on the Canadian economy. The BoC's next rate decision is scheduled for April 29, alongside the Monetary Policy Report (MPR).

Coming up: US PPI inflation hot in the barrel

Tuesday's Producer Price Index (PPI) for March is expected to show headline PPI rising 1.2% MoM, up from 0.7% in February, with the YoY reading jumping to 4.6% from 3.4%. The data will capture the opening stages of increased energy costs flowing through the US economy since the Iran war began, and a hotter-than-expected print could further complicate the Fed's rate path heading into the April 28 to 29 Federal Open Market Committee (FOMC) meeting.

USD/CAD 5-minute chart

Technical Analysis

In the five-minute chart, USD/CAD trades at 1.3792, holding a bearish near-term bias as it remains below the 200-period exponential moving average (EMA) at 1.3819. The pair stays capped by this dynamic barrier, suggesting sellers retain control despite the Stochastic RSI hovering in elevated territory near 84, which hints at short-term upside attempts that so far fail to reclaim the overriding resistance.

On the topside, immediate resistance is located at the 200-period EMA around 1.3819, and a sustained break above this level would be needed to ease the current downside pressure. In the absence of clearly defined supports from the available data, any pullback from current levels would leave recent lows as the next reference area for buyers to defend, while rallies are likely to be sold while the price holds beneath the 200-period EMA.

In the four-hour chart, USD/CAD trades at 1.3792. The pair holds a constructive near-term bias as it consolidates just above the 200-period Exponential Moving Average (EMA) at 1.3791, keeping recent gains broadly supported after reclaiming the broken downward resistance trend line drawn from 1.3680. Stochastic RSI around 67 suggests bullish momentum is still in play but losing some of its earlier overbought intensity, hinting at a potential pause rather than an outright reversal while price hovers over the key moving average.

On the downside, immediate support is located at the 1.3790 area, defined by the proximity of spot to the 200-EMA, with the former descending trend-line break zone near 1.3680 acting as a deeper floor if selling pressure accelerates. With no clear overhead technical barriers from the provided levels, sustained trade above the 200-EMA would keep the short-term bias tilted higher, while a decisive drop back below that moving average would weaken the bullish structure and expose the 1.3680 region.

In the daily chart, USD/CAD trades at 1.3792, consolidating in a tight band between its major moving averages and leaving the near-term bias broadly neutral. Price holds above the 50-day exponential moving average (EMA) at 1.3773, which lends initial trend support, but it remains capped by the 200-day EMA at 1.3815 just overhead, limiting topside follow-through. The Stochastic RSI has retreated toward the lower half of its range, hinting that bullish momentum has faded after the recent advance, but without yet signaling oversold conditions.

On the topside, immediate resistance is located at the 200-day EMA around 1.3815; a daily close above this barrier would be needed to re-open a more constructive upside phase. On the downside, the 50-day EMA at 1.3773 acts as first support; a break beneath this level would expose a deeper pullback and tilt the balance in favor of sellers in the near term.

(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.