On Friday, the USD/CAD rate increased by less than 0.1%, rebounding from the early session low near 1.3560 and reaching a level of around 1.3590. The pair lost about 0.6% on the week after breaching the 1.3700 area mid-week, and momentum seemed sluggish near 1.3580 as a cluster of miniature candles indicated indecision.
The US-Iran conflict and the continued closure of the Strait of Hormuz remain the dominant factors driving persistently high oil prices and favoring the commodity peg of the Canadian dollar. Ceasefire talks stalled over the weekend, with both sides hardening their positions, and the U.S. naval blockade of Iranian ports persists despite the administration’s sporadic assurances of progress, which markets are largely discounting.
The U.S. ISM Purchasing Managers’ Index (PMI) held steady at 52.7 in April, a hair off the consensus reading of 53.0, while the employment index fell to 46.4 and the prices paid component rose to 84.6, the highest reading in more than four years. Canada’s S&P Global Manufacturing PMI rose to 53.3 from 50.0 in March, returning the sector to expansion. Markets are now looking ahead to a tough calendar for next Friday, the main topic of which will be US non-farm payrolls (NFP), with the consensus pointing to 73,000. compared to the previous 178 thousand and Canadian employment data, where the unemployment rate remains unchanged at 6.7%.
USD/CAD 5-minute chart
Technical analysis
On the five-minute chart, USD/CAD is trading at 1.3587, hovering just above the daily open at 1.3580, which is now immediate intraday support. The pair has lost its upside momentum from earlier gains, while the descending resistance trendline established from 1.3680 continues to limit broader rebound potential. The latest Stochastic RSI reading has retreated towards lower levels, indicating that bullish pressure is easing and the near-term tone remains broadly neutral while price hovers around the opening level.
On the other hand, a clear break below the daily open at 1.3580 would expose softer intraday levels and suggest that sellers are regaining control in the very near term. Upside, the next significant barrier is the bearish resistance line emerging from 1.3680, and only a sustained move towards this area and a subsequent break higher could undermine the broader corrective bias and open the way for a more convincing extension higher.
On the one-hour chart, the USD/CAD rate is at 1.3589, maintaining a slightly bearish tone in the miniature term as it remains capped by the falling resistance trend line around 1.3680. The lack of nearby moving averages in the data set focuses attention on this structural barrier, while the stochastic RSI has recently climbed into elevated territory above 70, suggesting that upside attempts may be exhausted below the mentioned trend line.
At the top, the immediate headwind is the descending trendline resistance at 1.3680, and a sustained break above that level would be necessary to ease the current bear pressure and open the way to a stronger recovery. Without clearly defined intraday support in the data provided, any pullback from current levels would likely leave traders on initial demand looking for previous session lows and intraday swing points below 1.3589, while an inability to break 1.3680 would leave the pair vulnerable to further downside probes.
(The technical analysis for this story was written with the support of an AI tool.)
Canadian Dollar FAQs
The key factors shaping the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of crude oil, which is Canada’s largest export, the condition of its economy, inflation and the trade balance, i.e. the difference between the value of Canadian exports and imports. Other factors include market sentiment – whether investors are taking on riskier assets (with risk) or looking for sheltered havens (with risk), with risk being positive relative to CAD. As the United States’ largest trading partner, the health of the U.S. economy is also a key factor influencing the exchange rate of the Canadian dollar.
The Bank of Canada (BoC) has significant influence over the Canadian dollar by setting the interest rates that banks can lend to each other. This affects the level of interest rates for everyone. The main goal of the BoC is to keep inflation at 1-3% by raising or lowering interest rates. Relatively higher interest rates tend to benefit CAD. The Bank of Canada may also utilize quantitative easing and tightening to influence lending terms, with the former being CAD negative and the latter CAD positive.
The price of oil is a key factor influencing the value of the Canadian dollar. Oil is Canada’s largest export, so the price of oil usually has a direct impact on the value of CAD. Generally speaking, if the price of oil increases, CAD also increases because aggregate demand for the currency increases. The opposite is true when the price of oil falls. Higher oil prices also tend to result in a greater likelihood of a positive trade balance, which also supports CAD.
While inflation has always traditionally been considered a negative factor for currency because it reduces the value of money, in newfangled times the opposite has been true with the relaxation of cross-border capital controls. Higher inflation prompts central banks to raise interest rates, which attracts more capital inflows from global investors looking for a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian dollar.
Macroeconomic data releases are used to assess the condition of the economy and may affect the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can influence the direction of CAD. A sturdy economy is good for the Canadian dollar. Not only will it attract more foreign investment, but it could encourage the Bank of Canada to raise interest rates, leading to a stronger currency. However, if economic data is delicate, CAD will likely decline.
