A slight rebound in the US dollar provided support for USD/CAD, while the Canadian dollar was weighed down by oil prices and geopolitical risks.
2025-12-18 11:10:47
On Thursday during the Asian session, USD/CAD remained in a narrow range around 1.3790. The US dollar remained stable amid a wait-and-see market sentiment, with investors awaiting the later release of the US CPI report for the latest clues on inflation and policy expectations.
CPI data will directly influence market expectations regarding the future path of Federal Reserve interest rates, thus potentially impacting the US dollar and USD/CAD. Christopher Waller, a Federal Reserve governor and one of the nominees for Fed Chair, reiterated his dovish stance, stating, "Given that inflation remains high, we can adjust policy rates with patience, steadily lowering them to a neutral level."
The market continues to price in the probability that the Federal Reserve will keep interest rates unchanged at its January meeting, currently at approximately 75.6% according to the CME FedWatch tool, slightly up from 74% last week. On the other hand, the Canadian dollar is under pressure from falling oil prices. As a commodity currency, the CAD is sensitive to changes in oil prices, and the recent downward pressure on oil prices has significantly weighed on the CAD.
Geopolitical risks also increased support for the US dollar. The US has ordered a complete blockade of sanctioned oil tankers' shipping to and from Venezuela, while pushing for stricter sanctions on Russia's energy sector to facilitate peace talks in Ukraine, raising concerns in the market about global supply disruptions.
Overall, the US dollar is supported by cautious policy sentiment and safe-haven demand, while the Canadian dollar is under pressure from weaker oil prices and geopolitical risks. In the short term, the USD/CAD exchange rate may remain volatile at high levels and fluctuate in response to changes in oil prices and the Federal Reserve's policy signals.
From the daily chart, USD/CAD rebounded to above 1.3790 after touching the support at 1.3730. The short-term moving averages are slightly upward sloping, but are still below the medium and long-term moving averages, indicating that the overall trend is biased towards consolidation.
The RSI indicator is around 52, in the neutral range, indicating a temporary balance between bullish and bearish forces. A decisive break above the 1.3820–1.3850 resistance level could open up further upside potential; conversely, a break below the 1.3730–1.3700 support level would increase the short-term downside risk. The daily chart shows the price is still consolidating at higher levels, with no clear trend signal yet.
Editor's Note:
The USD/CAD pair is expected to remain range-bound in the short term, primarily influenced by expectations surrounding US dollar policy and the commodity-like nature of the Canadian dollar. Increased geopolitical tensions have fueled safe-haven demand, supporting the US dollar, while oil price volatility has limited the CAD's performance.
Before key data and events are released, pay attention to the US CPI results and oil price trends, and wait for clear directional signals.
CPI data will directly influence market expectations regarding the future path of Federal Reserve interest rates, thus potentially impacting the US dollar and USD/CAD. Christopher Waller, a Federal Reserve governor and one of the nominees for Fed Chair, reiterated his dovish stance, stating, "Given that inflation remains high, we can adjust policy rates with patience, steadily lowering them to a neutral level."
The market continues to price in the probability that the Federal Reserve will keep interest rates unchanged at its January meeting, currently at approximately 75.6% according to the CME FedWatch tool, slightly up from 74% last week. On the other hand, the Canadian dollar is under pressure from falling oil prices. As a commodity currency, the CAD is sensitive to changes in oil prices, and the recent downward pressure on oil prices has significantly weighed on the CAD.
Geopolitical risks also increased support for the US dollar. The US has ordered a complete blockade of sanctioned oil tankers' shipping to and from Venezuela, while pushing for stricter sanctions on Russia's energy sector to facilitate peace talks in Ukraine, raising concerns in the market about global supply disruptions.
Overall, the US dollar is supported by cautious policy sentiment and safe-haven demand, while the Canadian dollar is under pressure from weaker oil prices and geopolitical risks. In the short term, the USD/CAD exchange rate may remain volatile at high levels and fluctuate in response to changes in oil prices and the Federal Reserve's policy signals.
From the daily chart, USD/CAD rebounded to above 1.3790 after touching the support at 1.3730. The short-term moving averages are slightly upward sloping, but are still below the medium and long-term moving averages, indicating that the overall trend is biased towards consolidation.
The RSI indicator is around 52, in the neutral range, indicating a temporary balance between bullish and bearish forces. A decisive break above the 1.3820–1.3850 resistance level could open up further upside potential; conversely, a break below the 1.3730–1.3700 support level would increase the short-term downside risk. The daily chart shows the price is still consolidating at higher levels, with no clear trend signal yet.
Editor's Note:
The USD/CAD pair is expected to remain range-bound in the short term, primarily influenced by expectations surrounding US dollar policy and the commodity-like nature of the Canadian dollar. Increased geopolitical tensions have fueled safe-haven demand, supporting the US dollar, while oil price volatility has limited the CAD's performance.
Before key data and events are released, pay attention to the US CPI results and oil price trends, and wait for clear directional signals.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
