Title: USD/CAD Retraces from 10-Week High but Posts Weekly Gains: A Detailed Market Analysis
Originally reported by Miroslav Marinoff for TradingPedia
The USD/CAD currency pair, a key indicator of the economic relationship between the United States and Canada, recently settled below its 10-week high but still managed to post a solid weekly gain. As of the trading week ending August 2nd, 2025, the USD/CAD pair climbed by approximately 0.7%, closing at 1.3285 after touching a high of 1.3324 midweek. This movement reflects an interplay of economic data releases, market sentiment, and broader macroeconomic factors that have influenced investor behavior throughout the week.
This article offers a comprehensive analysis of recent developments in the USD/CAD currency pair, shedding light on what has driven these market movements and what stakeholders might expect in the near future.
1. Week-in-Review: USD/CAD Market Performance
The USD/CAD opened the week with a relatively neutral tone but gradually gained strength, buoyed by data releases from both Canada and the United States.
Key performance metrics:
– Weekly gain of 0.7% for the USD/CAD pair
– Retreated from a multi-week high of 1.3324
– Closed the week at 1.3285
This movement suggests a moderate bullish momentum for the USD against the Canadian dollar, despite the pullback from the weekly peak. Traders reduced some of their positions on the final trading day of the week, possibly in anticipation of key economic announcements scheduled for the following week.
2. Canadian Economic Data and Its Impact
The Canadian dollar faced downward pressure over the course of the week, largely due to weaker-than-expected domestic economic data.
Highlights include:
– Canada’s June GDP report showed stagnant economic growth at 0% versus the expected increase of 0.1%
– A downturn in oil prices weighed further on the Canadian dollar, given the country’s heavy reliance on energy exports
– Business investment data indicated a pullback, signaling weaker confidence in future economic activity
The stagnation in GDP points to softness in Canada’s economic growth, which potentially pressures the Bank of Canada to maintain a dovish stance on monetary policy. As a result, investors saw less incentive to hold Canadian dollars in the short term.
3. U.S. Dollar Resilience Backed by Fed Expectations
On the U.S. side, the greenback has shown resilience in light of hawkish guidance from the Federal Reserve.
Contributing factors to USD strength:
– U.S. GDP for Q2 rose at an annualized pace of 2.4%, surpassing analyst expectations of 1.8%
– The Federal Reserve, in its latest FOMC meeting, raised its benchmark interest rate by 25 basis points, bringing it to a range of 5.25–5.50%
– Fed Chair Jerome Powell gave little indication that the rate hike cycle is over, reiterating that future policy will remain data-dependent
These factors have reinforced bullish sentiment around the greenback, resulting in increased demand. In currency markets, higher interest rates in the U.S. relative to Canada can attract capital inflows, supporting USD strength.
4. Crude Oil Prices and Their Impact on USD/CAD
Oil plays a pivotal role in the Canadian economy, as crude is one of the country’s main exports. Consequently, the price of oil often correlates strongly with movements in the Canadian dollar.
Recent developments:
– West Texas Intermediate (WTI) crude fell approximately 2% during the week, dropping below $79 per barrel
– Production cuts implemented earlier in the year by OPEC+ and a slowdown in Chinese demand have created downward pressure on prices
– Canadian energy exports are thus less profitable, reducing foreign exchange inflows into CAD
As oil prices weakened, so did investor confidence in the Canadian dollar. This contributed to the strength of USD/CAD
Read more on USD/CAD trading.