Rising oil prices support Canadian Dollar: USD/CAD support levels in focus

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US Dollar vs Canadian Dollar falls 0.52%

Highlights

The Bank of Canada maintained a hawkish policy stance at its September meeting, supporting Canadian Dollar demand.
Rising oil prices improved Canada’s position as an energy exporter and increased support for the domestic currency.
USD/CAD trades below key moving averages with negative momentum signals, projecting a high probability of further downside within the C$1.3704 to C$1.3842 range.

Loonie gains as policy hawks and oil rally fuel demand

USD/CAD's recent downtrend has been shaped by the Bank of Canada's hawkish stance at its September policy meeting, which has signaled tighter monetary policy and supported demand for the Canadian Dollar, according to Fxstreet. This shift has been accompanied by a rise in oil prices, bolstering Canada's position as an energy exporter and further increasing demand for the domestic currency. At the same time, broad weakness in the US Dollar has contributed to the continued decline in USD/CAD values, with these factors reinforcing the prevailing market bias.

Intraday weakness intensifies with negative momentum readings

On the hourly chart, the pair is trading below the MA-20 at C$1.382 and the MA-50 at C$1.3866, as well as below the long-term MA-200 at C$1.3836. Immediate resistance sits at the Ichimoku Kijun level of C$1.3834, while short-term support is at C$1.3704. Technical indicators show negative momentum: MACD and ADX reflect a selling bias, RSI is deep in the sell zone at 21.6, and CCI remains oversold. Stochastic RSI is neutral, while Bull/Bear Power continues to favor sellers, and the Awesome Oscillator offers a neutral reading. The configuration points toward persistent intraday weakness, though the oversold CCI may suggest scope for a minor rebound.

Downside bias persists amid range-bound trading and weak rebound odds

In the short term, USD/CAD is likely to remain within a narrow range between C$1.3704 and C$1.3842, consistent with recent volatility patterns. The probability of a sustained upward move is low, while further downside pressure is highly likely, diminishing chances of a meaningful rebound. A decisive close above C$1.3834 would open a bullish scenario, whereas a break below C$1.3704 would reinforce the bearish path.

Viktoras Karapetjanc, expert at Traders Union, believes that the Canadian Dollar continues to benefit from the Bank of Canada's hawkish message and firm oil prices. He sees the macro backdrop and market sentiment aligning in favor of continued USD/CAD weakness, as downside pressure is reinforced by technical signals. The analyst notes that, unless significant resistance at C$1.3834 is reclaimed, near-term risks remain skewed to the downside. "With fundamentals supporting the CAD and technicals pointing lower, I expect sellers to stay in control unless we see a clear shift above key resistance levels," says Karapetjanc.

Earlier, analysts noted that mixed technical momentum and a narrow trading band had left USD/CAD direction uncertain, with traders awaiting a decisive move. Recent developments underscore persistent downside pressure as both policy divergence and commodity trends support the Canadian dollar, making a break below C$1.3704 a key risk to monitor for further bearish extension.

Source of Data: USD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.