USD/CAD price consolidates above $1.43 as oil weakness and BoC stance limit downside
USD/CAD consolidates above 1.43 as oil weakness and BoC stance limit downside
The USD/CAD pair remains in a tight range above 1.43 following a sharp pullback from its two-decade high. The pair saw significant losses over the past two days but has found support amid weak oil prices and the Bank of Canada’s dovish policy stance.
Despite these factors supporting the U.S. dollar against the Canadian dollar, Fed rate cut expectations have limited further upside, keeping USD/CAD in a consolidation phase.Oil prices continue to struggle after rebounding from their year-to-date low, reflecting U.S.-China trade tensions and weaker demand concerns. This has weighed on the Canadian dollar, which is highly sensitive to oil price movements. Additionally, the Bank of Canada (BoC) remains cautious on the economic outlook, reinforcing expectations that interest rates could stay low for an extended period.
USD/CAD price dynamics (Dec 2024 - Feb 2025) Source: TradingView.
Weaker U.S. dollar caps upside for USD/CAD
The U.S. dollar index (DXY) remains near its weekly low, pressured by expectations that the Federal Reserve will move toward rate cuts later in 2025. This sentiment was reinforced by the latest JOLTS report, which indicated a slowdown in the U.S. labor market, fueling speculation that the Fed may ease monetary policy to support growth.
U.S. President Donald Trump’s decision to delay a 25% tariff on Canadian and Mexican imports by 30 days also contributed to the loonie’s stability. While the tariff postponement eased some immediate trade concerns, the broader uncertainty surrounding U.S.-Canada trade relations continues to influence market sentiment.
Outlook: Oil prices and BoC policy in focus
Traders are closely watching upcoming U.S. data releases, including the ADP private-sector employment report and ISM Services PMI, which could influence the U.S. dollar’s direction. Meanwhile, oil price dynamics remain a critical factor for the Canadian dollar’s movement, with any further declines likely to weaken the loonie further.
For USD/CAD, 1.43 serves as a key pivot point. A break below this level could trigger a move toward 1.42, while resistance remains near 1.4400–1.4450. Unless oil prices recover significantly or the Fed signals a shift in its rate outlook, the pair is likely to remain range-bound in the near term.
Previously discussed: USD/CAD’s recent decline followed Canada’s trade relief measures, including Prime Minister Trudeau’s confirmation that U.S. tariffs on Canadian goods would be paused for 30 days, temporarily reducing concerns about supply chain disruptions. However, Canada’s low GDP growth and BoC’s dovish stance continue to pressure the loonie.
