The USD/CAD pair faces renewed selling pressure on Thursday, trading near 1.3865 with a modest daily decline of under 0.10%. A slight retreat in the US dollar, driven by cautious market sentiment ahead of key economic events, weighs on the pair.
Investors eagerly await the US Producer Price Index (PPI) data and Federal Reserve Chair Jerome Powell’s upcoming speech, both expected to provide fresh cues on US monetary policy.
Meanwhile, declining crude oil prices continue to pressure the commodity-linked Canadian dollar (loonie), offering some support to the USD/CAD pair.
As of May 15, 2025, WTI crude oil prices have dipped to around $78.50 per barrel, extending losses for a second consecutive day, which limits the loonie’s strength.
Despite this, technical indicators suggest a potential buying opportunity near the 1.3935-1.3900 support zone, with the pair struggling to break above the critical 1.4000 confluence level.
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Technical Outlook: Key Levels to Watch
The USD/CAD pair's recent inability to stay above the 1.4000 level, where the 200-day Simple Moving Average (SMA) meets the 23.6% Fibonacci retracement of the March-May drop, highlights its importance as a strong barrier. Daily chart oscillators are showing early signs of positive momentum, indicating that dips toward 1.3935 could attract buyers.
A decisive break below 1.3900, however, might trigger a bearish shift, potentially driving the pair toward 1.3855 or even the 1.3800 level. Further downside could test the year-to-date low, near 1.3750.
On the other hand, if the price stays above 1.4000, it could lead to an upward trend, aiming for the 1.4050 resistance and possibly reaching the 1.4100-1.4150 area, which matches the 38.2% Fibonacci level.
Did You Know?
The Canadian dollar is nicknamed the "Loonie" due to the image of a common loon, a bird native to Canada, on the country’s one-dollar coin. This term has become widely used in financial markets to refer to the CAD.
Fundamental Drivers: US PPI and Oil Prices in Focus
The US PPI, a key gauge of producer-level inflation, is anticipated to influence USD sentiment. Economists project a year-over-year PPI increase of 2.4% for April, slightly higher than March’s 2.1%, which could bolster the USD if the data exceeds expectations. A stronger-than-forecast PPI reading may reinforce expectations of sustained high interest rates, supporting the USD against the CAD.
Meanwhile, Powell’s speech later today is expected to shed light on the Fed’s rate hike outlook, especially after recent US CPI data showed persistent inflationary pressures.
On the Canadian side, falling oil prices remain a headwind for the loonie, as Canada’s economy heavily relies on energy exports. Real-time data indicates Brent Crude is trading near $82.30, reflecting global demand concerns, which could further cap CAD gains.
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Market Sentiment and Trading Strategy
Market participants exhibit hesitancy, as the price action of the USD/CAD pair reflects a conflict between USD caution and CAD weakness. Traders may find opportunities in range-bound trading until clearer signals emerge from the US data or Powell’s remarks.
For bullish traders, a breakout above 1.4000 could signal a stronger uptrend, while bearish traders might target short positions if the pair slips below 1.3900. Given the pair’s sensitivity to oil prices and US economic indicators, staying updated on these developments is crucial for informed trading decisions.
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