**USD/CAD Trends Lower After Testing 10-Week High: Weekly Performance Still Positive**
*Adapted and expanded from an original article by TradingPedia published on August 2, 2025.*
The USD/CAD currency pair experienced a notable fluctuation during the past trading week. While traders observed a surge that saw the pair testing a 10-week high, the Canadian dollar managed to regain some ground by the end of the week. Despite the corrective pullback in Friday’s session, the USD/CAD still concluded the week with a moderate gain, underlining a cautiously bullish sentiment in the market.
This article explores the recent performance dynamics of the USD/CAD pair, key technical levels, macroeconomic data impacting the exchange rate, and potential drivers for future price action. Additional context is included based on insights sourced from reputable financial news outlets and financial data providers.
## Weekly Overview
Throughout the week ending August 2, 2025, USD/CAD remained buoyant as risk sentiment, macroeconomic updates, and crude oil prices influenced the price action:
– The pair tested a 10-week high on Thursday, briefly touching 1.2870, a level not seen since mid-May.
– By Friday, a combination of profit-taking, easing Treasury yields, and a rebound in crude oil prices dragged the pair lower, closing the week near 1.2780.
– The USD/CAD pair managed a 0.7% weekly gain despite Friday’s retreat, recording its third consecutive weekly rise.
The action suggests short-term bullish momentum interrupted by an end-of-week correction.
## US Dollar Factors: Economic Data and Fed Policy Outlook
The strength of the US Dollar throughout much of the week was attributable to robust macroeconomic data and shifting expectations surrounding monetary policy. Here are the key influences:
– **US Q2 GDP Growth**: Preliminary estimates showed the US economy expanded by 2.4% in the second quarter of 2025, outperforming consensus expectations of 1.8%. Strong consumer demand and corporate investment contributed to the upside surprise.
– **Core PCE Inflation**: The Fed’s preferred measure of inflation remained sticky. June’s core Personal Consumption Expenditures (PCE) price index rose 4.2% year-over-year, slightly exceeding forecasts, indicating potential challenges in returning inflation to the Fed’s 2% target.
– **FOMC Comments**: Federal Reserve Board members expressed mixed signals about future rate hikes. While inflation remains elevated, signs of cooling labor markets and high borrowing costs prompted cautious tones. Still, markets priced in a 25% chance of another rate hike before year-end.
– **Treasury Yields**: Yields on 10-year US government bonds climbed mid-week toward 4.1%, supporting USD demand. However, a sharp drop on Friday to 3.95% aligned with weaker-than-expected wage growth, pressuring the Greenback.
## Canadian Dollar Dynamics: Data and Commodity Influence
The Canadian dollar struggled for most of the week due to underwhelming domestic data and volatility in global oil markets but made a late-week recovery:
– **GDP Report**: Canada’s monthly GDP report revealed flat economic growth in May, raising concerns about a potential slowdown. Analysts had expected a modest 0.2% growth. Key sectors such as manufacturing and construction showed contraction, while services provided marginal offsetting gains.
– **BoC Monetary Policy Stance**: The Bank of Canada maintained its policy rate at 5%, as expected, reiterating its data-dependent stance. Policymakers highlighted a growing risk of a slowdown, consistent with recent GDP numbers, fueling expectations that the tightening cycle is nearing its end.
– **Oil Prices**: As a commodity-linked currency, the Canadian dollar is sensitive to movements in crude oil. WTI crude dropped below $78 per barrel mid-week due to concerns about Chinese demand and rising US inventories. However, prices rebounded to $81 by Friday amid
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