**USD/CAD Surges Past 1.4050 Amid Risk Aversion and Declining Oil Prices**
*Based on original reporting by FXStreet, authored by FXStreet Team*
The USD/CAD currency pair recorded a strong rally, pushing above the key 1.4050 level as the week began. This upward momentum is driven largely by a mix of global risk aversion, weakening oil prices, and strong demand for the U.S. dollar. As geopolitical tensions rise and investors seek safety, the Canadian dollar, which is closely tied to commodity markets, has come under pressure. Meanwhile, the U.S. dollar continues benefiting from investor preference for safe-haven assets.
This article provides a comprehensive breakdown of the current USD/CAD trends, incorporating additional insights from various financial sources and macroeconomic data to deliver a complete picture of what’s driving this significant movement in the currency pair.
## Key Drivers Behind USD/CAD’s Upsurge
1. **Risk-Off Market Sentiment:**
– Global financial markets continue to experience heightened uncertainty driven by geopolitical tensions, slowing economic indicators in major economies, and central bank policy ambiguity.
– Investors have responded by retreating from riskier assets like equities and emerging market currencies and are flocking to safer instruments like the U.S. dollar and U.S. Treasury bonds.
– As a result, the Canadian dollar—often regarded as a higher-beta currency due to its reliance on commodity exports—has seen sharp depreciation against the greenback.
2. **Falling Oil Prices:**
– Crude oil prices remained under pressure, weakening the Canadian dollar further due to Canada’s dependency on oil exports.
– West Texas Intermediate (WTI) crude slipped below $85 a barrel, driven by concerns over sluggish global demand growth.
– The International Energy Agency (IEA) recently lowered its oil demand growth forecast for the remainder of the year, citing slowing economic activity in China and persistent inflation concerns worldwide.
– The drop in oil prices significantly hit the loonie, reinforcing upward momentum in the USD/CAD pair.
– Canada derives approximately 10 percent of its GDP from the energy sector, making its currency highly sensitive to movements in oil markets.
3. **U.S. Dollar Strength:**
– The U.S. Dollar Index (DXY)—which tracks the dollar against a basket of six major currencies—continued its upward streak, bolstered by safe-haven flows and relatively positive macroeconomic data in the U.S.
– U.S. Treasury yields are holding firm, with the benchmark 10-year note staying above 4.60 percent, adding to the greenback’s appeal.
– U.S. employment figures and better-than-expected retail sales in recent weeks have also strengthened expectations that the Federal Reserve may stay on a higher-for-longer interest rate trajectory.
4. **Technical Breakout Above Key Level:**
– The USD/CAD pair pushed decisively above the psychological resistance of 1.4000, eyeing the next resistance region at 1.4100.
– Technical indicators such as Relative Strength Index (RSI) and MACD (Moving Average Convergence Divergence) show bullish momentum.
– Many analysts see continuation potential if daily closes remain above 1.4050.
– Short-term support is now likely near the 1.3950–1.3980 region, while resistance lies closer to 1.4100 and 1.4150.
## Summary of Recent USD/CAD Price Movement
– The pair began Monday’s session consolidating above the 1.4000 threshold after recent gains.
– Risk-off tones firmly controlled investor behavior, reducing flows into commodity-based and emerging market currencies.
– Oil’s decline below $85 per barrel applied additional downward pressure on the Canadian dollar.
– As of the latest trading session, USD/CAD trades firmly above 1.4050, marking a fresh high not seen in several months
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