As inflation eases and oil prices weaken, USD/CAD continues its rebound.
2026-02-18 10:19:22
During Wednesday's Asian trading session, USD/CAD continued its rebound, trading around 1.3645. The US dollar remained relatively strong ahead of key events, while the Canadian dollar was dragged down by multiple negative factors, resulting in an overall weak performance.
Latest data shows that Canada's CPI rose 2.3% year-on-year in January, lower than the previous reading of 2.4% and market expectations of 2.4%. The decline in inflation has strengthened market expectations that the Bank of Canada may further ease policy.
Canada's economic growth momentum remains weak, with the housing market and consumer activity under pressure. Against this backdrop, policymakers may be inclined to support the economy through interest rate cuts. Rising expectations of rate cuts are weakening the Canadian dollar's attractiveness, causing it to weaken against the US dollar.
Meanwhile, weakening crude oil prices also put direct pressure on the Canadian dollar. News of progress in US-Iran nuclear negotiations eased geopolitical tensions, reduced market risk premiums, and led to a decline in oil prices.
Given that Canada is one of the world's major crude oil exporters, a drop in oil prices usually means a decline in expected export revenue, which in turn has a negative impact on the Canadian dollar.
Regarding the US dollar, the market remains cautious and on the sidelines. Investors are awaiting the FOMC meeting minutes to assess the Federal Reserve's latest assessment of the inflation path and economic outlook.
If the minutes release a more dovish signal and confirm the future path of interest rate cuts, the dollar may face short-term downward pressure; however, if the wording is cautious and emphasizes vigilance against inflation, the dollar may receive further support.
Overall, the current upward movement of USD/CAD is mainly driven by the weakening of the Canadian dollar, while the trend of the US dollar still needs to wait for confirmation from policy signals.
From the daily chart, USD/CAD has stabilized above the 1.3600 level after a previous pullback, and the short-term structure has turned bullish. The price is gradually returning above the 20-day moving average; if it can hold above 1.3650, it may further test the resistance level of 1.3700.
The RSI indicator has risen from the neutral zone, indicating a recovery in bullish momentum, but it has not yet entered the overbought zone, suggesting further upside potential. A break below 1.3600 could disrupt the short-term rebound structure, with support at 1.3550 as the next support level to watch.
The 4-hour chart shows that the exchange rate has formed a short-term upward channel, with the lows gradually rising, indicating a bullish short-term trend. The moving averages are in a bullish alignment, and the MACD is running above the zero line with the momentum bars remaining positive, suggesting that the upward momentum has not yet weakened.
A breakout above the 1.3660-1.3680 range would open up further upside potential; a drop below 1.3600 could lead to a pullback to the lower edge of the channel.
Editor's Note:
The current rebound in USD/CAD is largely due to the combined effects of weakening Canadian fundamentals and falling oil prices. If the Fed minutes are dovish, the dollar may face short-term pressure, thus limiting the upside potential of the exchange rate.
However, if the minutes take a cautious stance, the Canadian dollar may continue to weaken under the dual pressure of slowing inflation and falling oil prices. Until policy signals become clearer, the market may maintain an event-driven volatility pattern.
Latest data shows that Canada's CPI rose 2.3% year-on-year in January, lower than the previous reading of 2.4% and market expectations of 2.4%. The decline in inflation has strengthened market expectations that the Bank of Canada may further ease policy.
Canada's economic growth momentum remains weak, with the housing market and consumer activity under pressure. Against this backdrop, policymakers may be inclined to support the economy through interest rate cuts. Rising expectations of rate cuts are weakening the Canadian dollar's attractiveness, causing it to weaken against the US dollar.
Meanwhile, weakening crude oil prices also put direct pressure on the Canadian dollar. News of progress in US-Iran nuclear negotiations eased geopolitical tensions, reduced market risk premiums, and led to a decline in oil prices.
Given that Canada is one of the world's major crude oil exporters, a drop in oil prices usually means a decline in expected export revenue, which in turn has a negative impact on the Canadian dollar.
Regarding the US dollar, the market remains cautious and on the sidelines. Investors are awaiting the FOMC meeting minutes to assess the Federal Reserve's latest assessment of the inflation path and economic outlook.
If the minutes release a more dovish signal and confirm the future path of interest rate cuts, the dollar may face short-term downward pressure; however, if the wording is cautious and emphasizes vigilance against inflation, the dollar may receive further support.
Overall, the current upward movement of USD/CAD is mainly driven by the weakening of the Canadian dollar, while the trend of the US dollar still needs to wait for confirmation from policy signals.
From the daily chart, USD/CAD has stabilized above the 1.3600 level after a previous pullback, and the short-term structure has turned bullish. The price is gradually returning above the 20-day moving average; if it can hold above 1.3650, it may further test the resistance level of 1.3700.
The RSI indicator has risen from the neutral zone, indicating a recovery in bullish momentum, but it has not yet entered the overbought zone, suggesting further upside potential. A break below 1.3600 could disrupt the short-term rebound structure, with support at 1.3550 as the next support level to watch.
The 4-hour chart shows that the exchange rate has formed a short-term upward channel, with the lows gradually rising, indicating a bullish short-term trend. The moving averages are in a bullish alignment, and the MACD is running above the zero line with the momentum bars remaining positive, suggesting that the upward momentum has not yet weakened.
A breakout above the 1.3660-1.3680 range would open up further upside potential; a drop below 1.3600 could lead to a pullback to the lower edge of the channel.
Editor's Note:
The current rebound in USD/CAD is largely due to the combined effects of weakening Canadian fundamentals and falling oil prices. If the Fed minutes are dovish, the dollar may face short-term pressure, thus limiting the upside potential of the exchange rate.
However, if the minutes take a cautious stance, the Canadian dollar may continue to weaken under the dual pressure of slowing inflation and falling oil prices. Until policy signals become clearer, the market may maintain an event-driven volatility pattern.
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