Title: USD/CAD Attempts Recovery Amid Market Volatility – In-Depth Analysis and Forecast
Source: Adapted and expanded from an original article by Economies.com published on August 5, 2025
The USD/CAD currency pair has recently demonstrated signs of recovery, attempting to rebound from recent losses amid a volatile global economic environment. As of early August 2025, the pair has moved upward from previous support levels and is poised near key technical indicators that suggest possible continuation of the bullish trend — contingent on macroeconomic factors and central bank policy decisions.
This analysis delves into the current movement of USD/CAD, explores technical and fundamental drivers behind the rally attempt, and outlines scenarios traders and investors should pay attention to in the coming weeks.
Current Technical Overview
The USD/CAD currency pair is currently trading in a corrective upward trajectory, attempting to recover ground lost during previous sessions. The upward move remains contained within a short-term ascending channel.
Key Technical Indicators:
– Price has stabilized above the 1.3350 support level, an area that previously acted as resistance in June 2025.
– The 50-day Exponential Moving Average (EMA) is acting as a dynamic support level, reinforcing bullish activity.
– The Relative Strength Index (RSI) has rebounded slightly from oversold territory, now moving toward neutral ground around 50, suggesting a potential for further bullish momentum.
– MACD (Moving Average Convergence Divergence) indicator is in the negative zone but showing signs of convergence, a possible early sign of emerging upward momentum.
– Trading volume has slightly increased during bullish corrections, indicating growing interest from buyers near current levels.
With all technical factors considered, the bullish potential remains viable as long as the USD/CAD remains above the 1.3290 support level and within the upward price channel structure.
Fundamental Factors Driving the USD/CAD Movement
The price movement of USD/CAD is influenced by several key macroeconomic and geopolitical elements, many of which extend beyond conventional forex technicals.
1. Divergence in Monetary Policy Between Fed and BoC
The Federal Reserve (Fed) and the Bank of Canada (BoC) are each shaping their own interest rate narratives in 2025:
– The Fed has maintained a generally hawkish stance despite signs of moderating inflation. Chairman Jerome Powell’s recent comments indicated readiness to maintain higher interest rates longer, a message received positively by USD bulls.
– In contrast, the Bank of Canada has shown more dovish leanings, pausing rate hikes as inflation in Canada cooled faster than expected and economic growth remained sluggish in Q2 2025.
This divergence has put upward pressure on USD/CAD, as investors favor the USD’s yield advantage.
2. Falling Oil Prices
Since Canada is a major exporter of crude oil, changes in oil prices heavily affect the Canadian dollar:
– As of August 2025, West Texas Intermediate (WTI) crude oil is trading near $72 per barrel, down from the year’s high of over $85 in March.
– Declining oil prices reduce the value of Canadian exports and often lead to a softening Canadian dollar, pushing USD/CAD higher.
3. U.S. Economic Data Outperformance
Recent U.S. economic indicators have exceeded expectations:
– Non-farm payrolls rose by 275,000 in July 2025, beating forecasts of 240,000.
– Core PCE inflation remains at 2.4% YoY, slightly above the 2% Fed target, supporting the need for higher rates.
– Q2 2025 GDP growth was revised upward to 2.3% annualized, reflecting resilience in consumer spending and investment.
These numbers contrast with weaker Canadian GDP growth of 1.1% annualized, creating a pull factor toward the USD.
4. Geopolitical Stability and Risk Appetite
Global risk sentiment also plays a role:
– The ongoing tensions in the Taiwan Strait and uncertainty in the European bond
Read more on USD/CAD trading.