Title: USD/CAD Forecast and Technical Analysis – July 18, 2025
By: DailyForex.com, Original Reporting by Christopher Lewis
Expanded and rewritten by AI Assistant
Overview
The USD/CAD currency pair has experienced notable volatility in recent trading sessions, influenced primarily by shifting interest rate expectations, oil market fluctuations, and macroeconomic data from both the United States and Canada. As of July 18, 2025, traders are closely monitoring support and resistance levels, central bank rhetoric, and broader risk sentiment for directional cues.
This analytical piece aims to provide a comprehensive look at both the technical and fundamental aspects of the USD/CAD pair, incorporating data up to mid-July 2025 while citing key drivers likely to shape near-term price action.
Recent Price Action and Market Context
In the past month, USD/CAD has moved in a relatively sideways fashion, trading within a well-formed consolidation range between 1.3550 and 1.3760. Traders are seeing mixed signals from macroeconomic trends, with no clear catalyst yet strong enough to break the pair convincingly above or below these key technical boundaries.
Factors contributing to the recent price range include:
– A dovish shift in outlook by the Federal Reserve, which hinted at holding rates flat or lowering them later this year.
– The Bank of Canada’s cautious policy stance, with Governor Tiff Macklem emphasizing inflation concerns despite slowing growth.
– Crude oil prices, which remain a major driver for the Canadian dollar, have shown tepid momentum amid wavering global demand forecasts.
– Geopolitical developments, especially those impacting energy markets, notably the ongoing supply constraints due to tensions in the Middle East and production fluctuations from OPEC+.
Fundamental Drivers to Watch
1. Federal Reserve Rate Policy
– At its July meeting, the Federal Reserve held interest rates steady, citing subdued inflationary pressures and weaker-than-expected economic data.
– Market participants now assign a 63% probability (as of July 17, 2025) for a Fed rate cut by September, according to CME FedWatch.
– A more accommodative stance from the Fed weakens the US dollar’s appeal relative to other currencies.
2. Bank of Canada’s Monetary Policy Outlook
– The BoC maintained its overnight rate at 4.75% in July but hinted at potential rate adjustments if inflation does not converge toward target levels.
– Inflation in Canada eased to 2.3% in June, down from 2.7% in May, yet core inflation remains stickier than expected.
– Weak industrial output and contracting retail sales numbers suggest the Canadian economy may be in a shallow recession, applying pressure on the Loonie (CAD).
3. Crude Oil Prices and Canada’s Economy
– The Canadian dollar remains closely tied to global oil prices, given that petroleum exports are a major contributor to Canada’s GDP.
– WTI crude has been trading between $78 and $84 per barrel in July, lacking a clear bullish or bearish trend.
– OPEC+ maintains restricted production levels, but demand from China and Europe has not rebounded sufficiently to create a supply shortage.
– Short-term directional bias in oil will inevitably affect the Canadian dollar’s strength.
4. Economic Releases and Sentiment Indicators
Key data expected within the next week includes:
– U.S. retail sales, expected to increase 0.2% month over month.
– Canadian inflation report on July 22.
– U.S. PMI readings and jobless claims.
Any surprises in those releases, particularly those affecting inflation and labor markets, could lead to broader shifts in expectations around central bank policy and thereby influence the USD/CAD trajectory.
Technical Analysis as of July 18, 2025
The technical outlook for USD/CAD presents a mixed-to-bullish scenario on longer timeframes, while shorter-term charts suggest consolidation.
Key Support and Resistance Levels:
– Support Level 1: 1.3550 – A psychologically
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