Overview
The USD/CAD currency pair is currently testing a significant confluence level at 1.3728, which is a crucial resistance area. The recent rise in the pair is largely attributed to a strengthening US Dollar and robust US economic data.
Market Drivers
The Canadian Dollar (CAD) has been losing ground against the US Dollar (USD), reaching a daily high around 1.3725. The resurgence of the greenback has overshadowed the increase in oil prices, which typically support the CAD. Recent developments, including a US Supreme Court decision, have provided a boost to the USD.
Stronger-than-expected US economic indicators, such as a rise in Consumer Confidence (91.2 vs. 87.1 forecast) and an increase in the ADP Employment Change four-week average, have further supported the greenback.
Technical Analysis
Technically, USD/CAD has returned to the critical confluence level at 1.3728, which has previously acted as support in 2025 and has now become a resistance level in 2026. A break above this level could lead to further resistance at the 100 and 200-day moving averages, located at 1.3859 and 1.3810, respectively.
Should the USD experience a pullback, immediate support is seen at 1.3650, with the 1.3500 handle as the next significant level to watch.
Upcoming Catalysts
Market participants are in a "wait-and-see" mode as they anticipate key economic data releases. The Canadian Q4 GDP report is due on Friday, which is expected to be a major catalyst for the CAD's direction. Additionally, US Producer Price Index (PPI) data is also set to be released on the same day, which could introduce volatility in the markets.
Oil prices may also play a critical role in the CAD's performance. Any escalation in the US-Iran situation could lead to a surge in oil prices, potentially providing support for the CAD and hindering any upward movement in USD/CAD.