Loonie Lifted as BoC Hold Nears
USD/CAD slipped as firm oil prices and growing expectations for a Bank of Canada pause supported the loonie while the U.S. dollar softened.
USD/CAD fell by 0.5% at the start of trading on Monday as the Canadian Dollar gained ground ahead of this week’s Bank of Canada and Federal Reserve decisions. Higher crude prices continued to underpin the Loonie, with energy markets still elevated after the Iran-related supply shock. For Canada, stronger oil prices improve export revenues and terms of trade, giving the currency a natural tailwind even as broader global uncertainty lingers. At the same time, the U.S. dollar eased modestly as Treasury yields stabilized and markets awaited fresh U.S. inflation data later this week.
For the BOC, the base case remains a hold at 2.25% as policymakers assess whether the recent rise in gasoline prices feeds into broader inflation or proves temporary. Canada’s inflation backdrop remains manageable, but growth has been soft enough to keep officials cautious about tightening further. That leaves the BOC in a wait-and-see posture, balancing an oil-driven inflation pulse against a still-fragile domestic economy. USD/CAD’s move lower today reflects that relative mix: supportive commodity dynamics for Canada and a central bank expected to stay patient rather than turn more hawkish.
USD/CAD Price History
In the above chart, it’s worth recognizing the timescale: there has been a multiyear triangle forming in USD/CAD. The uptrend from the 2023 and 2026 swing lows is providing support while the 2025 and 2026 highs are creating resistance, and a funneling effect is taking place as USD/CAD moves towards the vertex of the consolidation. For now, momentum is pointing lower with each of the exponential moving average (EMA) envelope, Slow Stochastics, and MACD in comfortable bearish postures. A break of 1.3500 would raise the possibility of a more significant top having been carved out with broader implications for U.S. Dollar weakness.
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