**USD/CAD Trades Firmly Above 1.3650 on Elevated US Dollar Strength and Weak Oil Prices**
*By FXStreet Editorial Team | Originally reported by FXStreet*
The USD/CAD currency pair has continued to display strength as it sustains its position above the 1.3650 level. This momentum has been largely driven by a firmer US Dollar and softer oil prices, which have put pressure on the Canadian Dollar (CAD). As risk sentiment remains cautious and investors digest the latest economic data coming out of the United States and Canada, forex traders are closely watching the next moves for this pair.
Below is a comprehensive breakdown of the current market dynamics supporting the bullish bias for USD/CAD.
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## US Dollar Strength Supports Pair
One of the central themes driving USD/CAD higher is the consistent strength of the US Dollar (USD), especially amid global economic uncertainty and relatively hawkish monetary policy expectations from the Federal Reserve.
– **US Dollar Index (DXY) Performance**:
The US Dollar Index, which measures the greenback against a basket of major currencies, remains supported above the 105.00 level. This strength reflects continued investor confidence in the US economy and in the Federal Reserve’s monetary policy stance.
– **Federal Reserve Policy Outlook**:
– Federal Reserve officials have maintained a data-dependent posture, but recent economic reports suggest resilience in the US economy.
– Sticky inflation figures and a robust labor market have persuaded many market participants that the Fed is unlikely to cut interest rates anytime soon.
– This hawkish stand underpins Dollar strength.
– **Treasury Yields Rise**:
– The 10-year US Treasury yield edged higher, moving closer to the 4.30% mark.
– Rising yields make the Dollar more attractive due to the higher return on US assets, which in turn supports currency demand.
## Canadian Dollar Pressured by Falling Crude Oil Prices
As a commodity-linked currency, the Canadian Dollar is heavily influenced by oil prices. When oil prices fall, the CAD tends to weaken, particularly against the US Dollar. Recently, oil has faced downward pressure, amplifying the bullish momentum in USD/CAD.
– **WTI Crude Dips Below $80**:
West Texas Intermediate (WTI) crude – often used as a benchmark for North American crude oil – dropped below the $80 level, erasing previous gains from the week.
– **Contributing Factors to Declining Oil Prices**:
– Concerns over a potential slowdown in global demand, especially from major economies like China and Europe.
– Speculation that OPEC+ may not have as tight control over supply as previously perceived.
– Rising US oil inventories, signaling an
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