**USD/CAD Extends Decline Amid Weak Dollar and Easing U.S. Economic Data**
*Original Source: Economies.com | Author: Economies.com Staff*
The USD/CAD currency pair continued to experience sustained losses, driven by a weakening U.S. dollar and improved sentiment around the Canadian economy, particularly due to the rebound in oil prices. As of July 23, 2025, the pair fell further after failing to maintain a recovery attempt above key technical resistance levels. The bearish trend appears to be deeply rooted, as fundamental and technical indicators signal more downside potential in the short term.
This extended analysis builds upon the initial insights provided by Economies.com, offering a more comprehensive look into the market conditions, macroeconomic factors, and technical patterns influencing USD/CAD movements.
## Current Technical Overview
– USD/CAD is showing clear signs of continued bearish momentum.
– After a temporary retracement on minor gains, the pair was unable to breach the critical resistance at 1.3240.
– As a result, selling pressure re-emerged, pushing the pair to recent lows.
– The price action remains under the 50-day and 200-day exponential moving averages (EMAs), reinforcing the downtrend bias.
– The current trend targets the support area around 1.3080 in the near term.
### Technical Indicators Suggest Bearish Continuation
– The Relative Strength Index (RSI) is below 50, signaling weak bullish momentum and favoring ongoing selling pressure.
– The MACD (Moving Average Convergence Divergence) remains below the zero line, suggesting persistent downward momentum.
– USD/CAD is forming lower highs and lower lows, a structural hallmark of a bearish market.
– If the pair breaks below 1.3080, the next key support lies at 1.3000, a psychologically significant level.
## Fundamental Drivers of USD/CAD Decline
### Weakness in the U.S. Dollar
– The U.S. Dollar Index (DXY) fell to multi-week lows amid soft economic data.
– On July 22, 2025, U.S. Manufacturing PMI came in at 46.5, indicating contraction and missing expectations of 48.0.
– Housing starts and jobless claims have also shown weakness in recent weeks, raising concerns about the resilience of the U.S. economy.
– Markets are pricing in at least one interest rate cut from the Federal Reserve before the end of the year.
The dovish Fed outlook has undermined dollar strength, leading investors to pare back long positions on the greenback.
### Rising Oil Prices Support the Canadian Dollar
– Canada is a major crude oil exporter, and the loonie (Canadian dollar) is closely tied to oil price performance.
– West Texas Intermediate (WTI) crude edged above $81 per barrel, supported by:
– Rising summer demand in the Northern Hemisphere.
– Anticipated supply tightness due to production cuts from OPEC+.
– Improved risk appetite across commodity markets.
– As oil prices strengthen, demand for Canadian dollars typically increases, applying additional downside pressure on USD/CAD.
### Bank of Canada Policy Stance
– The Bank of Canada (BoC) adopted a more cautious tone in its last meeting, signaling that further rate cuts would be data-dependent and not rushed.
– Inflation in Canada remains elevated relative to pre-pandemic norms, which supports a cautious monetary policy stance.
– While inflation is slowing, the BoC is reluctant to accelerate easing, which contrasts with the more dovish tilt from the U.S. Federal Reserve.
This interest rate divergence reinforces investor preference for the Canadian dollar relative to the U.S. dollar.
## External Market Influences
### Global Risk Appetite
– Broader market risk sentiment has improved, supporting commodity currencies like CAD and Australian Dollar (AUD).
– Equity markets have rebounded following earnings optimism in major sectors such as tech and banking, reducing safe-haven demand for USD.
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