Title: USD/CAD Builds on Momentum as Recovery Prospects Strengthen
Original Author: Economies.com
Date: July 28, 2025
The USD/CAD currency pair continued its upward momentum, showing solid signs of a broader recovery trend. As the pair builds on its gains, supported by economic indicators and market sentiment, traders are closely watching key technical levels to assess whether bullish momentum is likely to continue or pause in the coming sessions.
The USD/CAD started showing bullish signs after finding a solid support base near the 1.3100 level. A recovery in the US dollar, combined with weakening crude oil prices and concerns around Canada’s economic growth, contributed to the pair’s rebound. With the pair now trading at elevated levels, technical traders expect further upside, provided key resistance areas are breached.
This article expands on the analysis provided by Economies.com and includes additional insights and data from other reputable sources to provide a comprehensive outlook on the USD/CAD currency pair.
Recent Price Action and Technical Analysis
As of the time of writing, the USD/CAD currency pair is trading around the 1.3250 mark, solidifying its position above the 50-day and 100-day exponential moving averages (EMA). The following technical developments support the short-term bullish outlook:
– A confirmed breakout above the 1.3170 resistance level, which had previously capped the upward movement, now opens the door for further gains.
– A rising trend line has developed, connecting higher lows since mid-July 2025, signaling steady buying interest.
– The 1.3310 level is being eyed as the next key resistance area. A sustained move beyond this could set the stage for a stronger push toward the 1.3375 level, a target defined by the 200-day moving average.
– Momentum oscillators, such as the Relative Strength Index (RSI), are tilted in favor of bulls. As of now, the RSI hovers near 60, showing no signs of overbought conditions yet.
– Support lies near 1.3200, followed by the 1.3170 breakout level, which may now serve as a floor in the near term.
Fundamentals Supporting the US Dollar Strength
Several macroeconomic and geopolitical factors have contributed to the US dollar’s current strength against the Canadian dollar. These include:
1. Stronger-than-expected US Economic Data
– The US economy has shown resilience in recent months, with better-than-expected GDP growth and robust labor market data.
– On July 25, 2025, the US Bureau of Economic Analysis reported annualized Q2 GDP growth at 2.2% compared to expectations of 1.9%, boosting investor confidence.
– The latest Non-Farm Payrolls report showed the US added 260,000 jobs in June 2025, reinforcing the notion that the labor market remains healthy.
2. Federal Reserve Policy Outlook
– Market expectations suggest that the Federal Reserve is likely to maintain its hawkish stance in upcoming meetings.
– Fed Chair Jerome Powell has emphasized data dependency while signaling readiness to keep interest rates elevated to combat inflation.
– The CME FedWatch Tool now indicates a 65% probability of another 25 basis point rate hike in the September 2025 meeting.
3. Decline in Crude Oil Prices
– Crude oil prices have declined over the past few weeks, with WTI futures falling from $83.00 to $78.50 per barrel.
– Canada, being a major oil exporter, is sensitive to oil price fluctuations. Lower oil prices reduce export revenues and dampen Canadian dollar demand.
– Recent reports from the International Energy Agency (IEA) indicate a temporary glut in crude oil supply due to higher output from OPEC+ nations.
4. Global Risk Aversion
– Global equity markets have turned volatile amid concerns about China’s economic slowdown and renewed tensions in the Taiwan Strait.
Read more on USD/CAD trading.