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The US dollar continued to rebound, supporting the upward trend of USD/CAD

2025-07-09 14:06:06

The dollar continues to be strong, and USD/CAD maintains the upward channel

In the Asian session on Wednesday, USD/CAD continued its rise from the previous trading day and returned to the 1.3700 level. Thanks to the broad strength of the US dollar and the inflow of safe-haven funds, the currency pair has maintained its strong pattern for nearly a week. Market sentiment is still constrained by the dual effects of the Fed's policy expectations and the tense atmosphere of global trade. In the short term, the US dollar will remain strong.

On Tuesday, U.S. President Trump promised to further escalate tariffs, planning to impose tariffs of up to 200% on foreign medicines and 50% on imported copper. Since the United States is one of Canada's largest export destinations for copper, the news directly hit the fundamentals of the Canadian dollar and provided additional support for USD/CAD.

"The threat of copper tariffs puts Canadian exports under greater pressure, and the market is concerned that structural shocks to trade will weaken the Canadian dollar." - According to market research
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The Fed's rate cut expectations are delayed, supporting the dollar sentiment

As the market generally believes that US tariffs may push up inflation, the Federal Reserve will tend to maintain higher interest rates for a longer period of time, thereby suppressing market expectations for a rapid rate cut this year. As a result, the US dollar maintained its strong performance near a two-week high, supporting further upside potential for the US dollar against the Canadian dollar.

Still, the market is pricing in a 50 basis point rate cut starting in October, according to the CME FedWatch tool, meaning investors will be watching closely to see if the FOMC minutes hint at a shift in the actual policy path.

Weak oil prices offer limited support to Canadian dollar

Although the Canadian dollar is highly sensitive to crude oil prices, the recent oil price trend is relatively weak, and the US dollar is clearly dominant. The slight fluctuation in oil prices has not provided effective support for the Canadian dollar. Therefore, the market's demand for the Canadian dollar is limited, further consolidating the upward trend of USD/CAD.

USD/CAD is currently trading around 1.3700, the highest point in the past eight trading days, and maintains an upward structure in the short term. If it breaks through the 1.3715 resistance zone, it may open up further upside space, with the target looking at 1.3760 and 1.3800 levels. The support below is at 1.3640 and 1.3600, and if it fails, it will weaken the short-term bullish outlook.

In terms of technical indicators, the RSI indicator on the 4-hour chart is mildly upward, and the MACD shows that the momentum is increasing, and the overall trend tends to continue in the short-term upward trend.
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Editor's opinion:

Against the backdrop of a high dollar, copper tariffs and weak oil prices, the Canadian dollar faces obvious fundamental pressure, while USD/CAD is in a double positive situation of technical and sentiment. In the short term, the market focuses on whether the FOMC meeting minutes will strengthen the tone of "higher interest rates for longer". If the minutes are hawkish, the US dollar may further strengthen, pushing USD/CAD to break through the current range and challenge higher targets.
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.

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