A stronger dollar and a decline in oil prices combined to push the USD/CAD pair to [missing information].
2026-02-05 11:07:03
The US dollar continued its rebound against the Canadian dollar (USD/CAD) during Thursday's Asian trading session, rising for the second consecutive trading day and trading around 1.3680. The overall strengthening of the US dollar was the core factor driving the exchange rate upward, as the market gradually lowered its expectations for a rapid interest rate cut by the Federal Reserve this year.
Recent statements from Federal Reserve officials reinforce this assessment. Federal Reserve Governor Lisa Cook stated that she does not support further rate cuts in the absence of clearer evidence of a decline in inflation, and emphasized that she is more concerned about a stalled decline in inflation than a cooling labor market.
This stance was interpreted by the market as a hawkish signal, prompting interest rate expectations to continue adjusting towards a "slower and more cautious path of rate cuts." Meanwhile, discussions surrounding changes in the Federal Reserve leadership also provided support for the dollar.
Markets are focused on the potential impact of President Trump's nomination of Kevin Warsh as the next Federal Reserve chairman. Warsh has long advocated for reducing the balance sheet and has been relatively cautious about aggressive interest rate cuts, which has deepened investors' expectations for future monetary policy independence and a tightening bias.
However, Trump himself attempted to balance market interpretations. He stated that he would not nominate Warsh as Federal Reserve Chairman if Warsh supported raising interest rates, and reiterated that there was still room for interest rates to be lowered, arguing that current interest rates were "too high" and that the US economy "has become wealthy again."
This statement limited market pricing in an extremely hawkish scenario to some extent, but did not reverse the dollar's recent strength. As for the Canadian dollar, its commodity attributes dragged down its performance.
International oil prices retreated after a previous rebound, with WTI crude oil prices falling by more than 0.5%, weakening external support for the Canadian dollar. The decline in oil prices occurred against the backdrop of a temporary easing of geopolitical tensions.
Iran has confirmed it will hold talks with the United States in Oman this week, and White House officials have also confirmed the two sides will engage in discussions on a potential nuclear agreement, easing market concerns about oil supply disruptions. Driven by a stronger dollar and downward pressure on oil prices, the USD/CAD pair has maintained its upward trend, with the short-term balance of power favoring the dollar.
From a daily chart perspective, USD/CAD has stabilized and rebounded after its previous pullback, with the price gradually moving away from the recent lows, indicating that buying support remains strong. Recent candlesticks have closed above the previous trading day, reflecting a recovery in short-term bullish momentum.
Regarding the moving average system, the exchange rate has regained its position above the short-term moving average, which is now turning upwards, and the distance between it and the medium-term moving average is gradually narrowing. This change indicates that the previous downward pressure has eased, and the price structure is transitioning from a weak correction to a more volatile but slightly stronger trend.
The medium-term moving averages continue to provide support for pullbacks, preventing a clear signal of trend weakening. In terms of momentum indicators, the RSI has rebounded from its lows to near the neutral zone and has not yet entered overbought territory, indicating that the current rebound is still in a technical correction phase and has not shown significant emotional overheating.
As long as the RSI remains above the midline, the exchange rate still has the potential for further upward movement. From a technical perspective, the area around 1.3680 has become a key area to watch in the short term. If the exchange rate can hold firmly above this area, further upside potential is expected.
Conversely, if the rebound momentum weakens and the price falls back below key support, the price action may revert to a range-bound pattern. Overall, the USD/CAD daily technical pattern leans towards stabilization and recovery, but new fundamental drivers are still needed to confirm the trend's continuation.
Editor's Note:
The core logic of the current USD/CAD exchange rate has shifted from solely driven by the Canadian dollar to being dominated by "expectations of US dollar policy." With the Federal Reserve's pace of interest rate cuts being continuously delayed, the US dollar has received sustained support, while the decline in oil prices has further amplified the Canadian dollar's passive weakness.
In the short term, as long as the US dollar remains relatively strong and oil prices struggle to rebound quickly, the downside potential for USD/CAD will be limited. However, given the continued uncertainty surrounding policy expectations, the exchange rate is more likely to exhibit a volatile but upward-biased trend rather than a one-sided upward movement. The key remains to observe whether the strength of the US dollar is sustainable and whether oil prices can regain new drivers.
Recent statements from Federal Reserve officials reinforce this assessment. Federal Reserve Governor Lisa Cook stated that she does not support further rate cuts in the absence of clearer evidence of a decline in inflation, and emphasized that she is more concerned about a stalled decline in inflation than a cooling labor market.
This stance was interpreted by the market as a hawkish signal, prompting interest rate expectations to continue adjusting towards a "slower and more cautious path of rate cuts." Meanwhile, discussions surrounding changes in the Federal Reserve leadership also provided support for the dollar.
Markets are focused on the potential impact of President Trump's nomination of Kevin Warsh as the next Federal Reserve chairman. Warsh has long advocated for reducing the balance sheet and has been relatively cautious about aggressive interest rate cuts, which has deepened investors' expectations for future monetary policy independence and a tightening bias.
However, Trump himself attempted to balance market interpretations. He stated that he would not nominate Warsh as Federal Reserve Chairman if Warsh supported raising interest rates, and reiterated that there was still room for interest rates to be lowered, arguing that current interest rates were "too high" and that the US economy "has become wealthy again."
This statement limited market pricing in an extremely hawkish scenario to some extent, but did not reverse the dollar's recent strength. As for the Canadian dollar, its commodity attributes dragged down its performance.
International oil prices retreated after a previous rebound, with WTI crude oil prices falling by more than 0.5%, weakening external support for the Canadian dollar. The decline in oil prices occurred against the backdrop of a temporary easing of geopolitical tensions.
Iran has confirmed it will hold talks with the United States in Oman this week, and White House officials have also confirmed the two sides will engage in discussions on a potential nuclear agreement, easing market concerns about oil supply disruptions. Driven by a stronger dollar and downward pressure on oil prices, the USD/CAD pair has maintained its upward trend, with the short-term balance of power favoring the dollar.
From a daily chart perspective, USD/CAD has stabilized and rebounded after its previous pullback, with the price gradually moving away from the recent lows, indicating that buying support remains strong. Recent candlesticks have closed above the previous trading day, reflecting a recovery in short-term bullish momentum.
Regarding the moving average system, the exchange rate has regained its position above the short-term moving average, which is now turning upwards, and the distance between it and the medium-term moving average is gradually narrowing. This change indicates that the previous downward pressure has eased, and the price structure is transitioning from a weak correction to a more volatile but slightly stronger trend.
The medium-term moving averages continue to provide support for pullbacks, preventing a clear signal of trend weakening. In terms of momentum indicators, the RSI has rebounded from its lows to near the neutral zone and has not yet entered overbought territory, indicating that the current rebound is still in a technical correction phase and has not shown significant emotional overheating.
As long as the RSI remains above the midline, the exchange rate still has the potential for further upward movement. From a technical perspective, the area around 1.3680 has become a key area to watch in the short term. If the exchange rate can hold firmly above this area, further upside potential is expected.
Conversely, if the rebound momentum weakens and the price falls back below key support, the price action may revert to a range-bound pattern. Overall, the USD/CAD daily technical pattern leans towards stabilization and recovery, but new fundamental drivers are still needed to confirm the trend's continuation.
Editor's Note:
The core logic of the current USD/CAD exchange rate has shifted from solely driven by the Canadian dollar to being dominated by "expectations of US dollar policy." With the Federal Reserve's pace of interest rate cuts being continuously delayed, the US dollar has received sustained support, while the decline in oil prices has further amplified the Canadian dollar's passive weakness.
In the short term, as long as the US dollar remains relatively strong and oil prices struggle to rebound quickly, the downside potential for USD/CAD will be limited. However, given the continued uncertainty surrounding policy expectations, the exchange rate is more likely to exhibit a volatile but upward-biased trend rather than a one-sided upward movement. The key remains to observe whether the strength of the US dollar is sustainable and whether oil prices can regain new drivers.
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- 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.
