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Today, on Friday, before the European session, the USD/CAD pair is trading within yesterday's range, below the 9-day EMA amid a weakening US dollar. However, current spot prices are still above the previous day's low and moving toward moderate growth for the first time in the last three weeks.
Oil prices are falling from a new monthly high, which is a result of profit-taking ahead of the weekend.
This is compounded by conflicting expectations regarding the monetary policies of the Bank of Canada and the US Federal Reserve, as well as new tariffs from the Trump administration, which are limiting the growth of the commodity-sensitive Canadian dollar. Moreover, the strengthening bullish sentiment for the US dollar requires a cautious approach before taking aggressive bearish positions on the USD/CAD pair.
Recent disappointing consumer inflation data from Canada confirmed assumptions that the Bank of Canada will keep interest rates unchanged until the end of 2026. Meanwhile, amid rising concerns about inflation driven by energy prices, traders are pricing in the likelihood of a rate hike by the US central bank by the end of the current year. Furthermore, the escalation of tensions between the United States and Iran may help limit deeper losses for the US dollar, which acts as a safe haven asset.
In the meantime, the Trump administration is preparing to impose new tariffs ranging from 10% to 12.5% on goods from 60 of the largest trading partners, covering nearly all of the country's imports. This further reduces investors' appetite for riskier assets amid ongoing geopolitical instability, thereby creating favorable conditions for strengthening the dollar.
Therefore, it is prudent to wait for further declines in the USD/CAD pair before concluding that its recovery from the more than month-low has reached its limits.
Today, for better trading opportunities, one should wait for the preliminary PMI indices from the US, which may impact the dollar. Additionally, developments related to the Middle East crisis will determine oil price dynamics and influence the USD/CAD pair amid overall positive dynamics. Then, attention should shift to the long-awaited two-day meeting of the Federal Open Market Committee (FOMC) next week, which will help set short-term benchmarks for the dollar's movement and the currency pair.
From a technical perspective, the fact that the pair has broken above and is trying to hold the 200 EMA on the 4-hour chart favors the bulls. Additionally, oscillators on the same chart have turned positive, confirming the bulls' advantage in the market.
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