USD/CAD Price Forecast: Will the pair stay near 1.4000 as bearish bias persists?

Further downside in USD/CAD could bring the five-month low of 1.3732 into view.
Continued selling pressure is suggested by the 14-day Relative Strength Index holding close to 38.
At 1.4069, the 50-day EMA marks the first resistance level.

A bearish near-term outlook persists for USD/CAD, although the pair is holding around 1.4010 in Friday’s Asian session after six consecutive days of declines. Its corrective retreat continues below the short- and medium-term moving averages. With both the 50- and nine-day Exponential Moving Averages (EMAs) above the spot price, the recent fall appears to have taken the pair below its dynamic trend supports, which now serve as overhead resistance.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Persistent downside pressure, rather than outright oversold conditions, is indicated by the 14-day Relative Strength Index (RSI) near 38 as momentum weakens. Meanwhile, a reading close to 127 on the FXS Fed Sentiment Index suggests a softer yet stable policy backdrop, offering little counterweight to the technical weakness.

A move lower could take USD/CAD towards the area surrounding 1.3732, the five-month low reached on May 21. Beyond that, support stands at 1.3481, the lowest level since October 2024.

On a recovery, USD/CAD could approach its first resistance at 1.4069, the 50-day EMA, before encountering the nine-day EMA at 1.4091. A sustained move above these averages would support a test of 1.4299, the 18-month high registered on October 14.

Chart Analysis USD/CAD — USD/CAD: What Does the Daily Chart Indicate?

Could a Wider North American Growth Gap After IMF Revisions Keep USD/CAD Anchored?

A less favourable outlook for the Canadian Dollar relative to the US is being reinforced by the latest IMF forecasts, according to strategists at Societe Generale. Explaining the widening growth divergence, they note that “with the IMF’s US growth forecast revised up to 2.5% this year (while remaining at 2.1% in 2027), the North American growth gap is widening.” The accompanying chart, they say, “shows relative Bloomberg consensus growth forecasts for 2027,” but “the IMF’s assessment (1.2% growth in Canada next year versus 2.1% in the US) is even less favourable for Canada.” Societe Generale also highlights rate spreads against this macroeconomic backdrop. It refers to “the chart on the left” showing “the two-year rate differential plotted against USD/CAD,” illustrating the continuing influence of relative growth and yield dynamics on the pair.

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

Canadian Dollar: Frequently Asked Questions

Which factors influence the Canadian Dollar most?

Movements in the Canadian Dollar (CAD) depend primarily on interest rates set by the Bank of Canada (BoC), Oil prices, the strength of Canada’s economy, inflation and the Trade Balance. Oil is Canada’s largest export, while the Trade Balance measures the difference between the value of its exports and imports. Investor sentiment also matters: an appetite for riskier assets (risk-on) generally supports CAD, whereas investors seeking safe havens reflect a risk-off mood. Conditions in the US economy are another major influence, given that the US is Canada’s largest trading partner.

How can Bank of Canada decisions affect the Canadian Dollar?

By determining the interest rate at which banks can lend to each other, the Bank of Canada (BoC) influences borrowing rates across the economy and, in turn, the Canadian Dollar. Keeping inflation within 1-3% is its principal objective, pursued through increases or reductions in interest rates. Relatively high rates generally support CAD. Credit conditions can also be shaped through quantitative easing or tightening, with easing weighing on CAD and tightening lending it support.

Why do Oil prices matter for the Canadian Dollar?

Changes in Oil prices often feed quickly into the Canadian Dollar because petroleum is Canada’s largest export. Rising Oil prices generally lift CAD by increasing overall demand for the currency; falling prices tend to have the reverse effect. More expensive Oil also makes a positive Trade Balance more likely, providing another source of support for CAD.

What effect can inflation figures have on the Canadian Dollar?

Higher inflation can support a currency in modern markets, reversing the traditional view that it is negative because it erodes the value of money. The relaxation of cross-border capital controls has helped bring about this change. When inflation rises, central banks tend to increase interest rates, drawing capital from international investors seeking attractive returns. The resulting inflows raise demand for the domestic currency, which in Canada is the Canadian Dollar.

Why does economic data matter for the Canadian Dollar?

The Canadian Dollar can respond to macroeconomic releases because they provide a measure of the economy’s health. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys can all shape CAD’s direction. Economic strength supports the currency by attracting foreign investment and may also prompt the Bank of Canada to raise interest rates, adding to that support. Weak economic readings, by contrast, are likely to weigh on CAD.