The USD/CAD pair exhibited a degree of strength during the Tuesday session, with the US dollar gaining modestly against the Canadian dollar, reflecting the Greenback’s ongoing resilience. USD/CAD has maintained a slightly positive tone during the early hours on Tuesday, oscillating around several key moving averages. It is important to note that the Canadian dollar is often influenced by oil prices; however, the traditional correlation between USD/CAD and crude has weakened recently, particularly as the United States now produces approximately 13.5 million barrels per day.
Recently, a potential development in Venezuela has emerged that could position it as a competitor to Canada in the heavy crude oil market, which remains relevant for USD/CAD dynamics. At the same time, a cautious Bank of Canada, currently holding rates at 2.25%, contrasts with a comparatively firm Federal Reserve that, despite mixed economic indicators, is not inclined toward aggressive rate cuts. This policy divergence continues to underpin a bid in USD/CAD.
At present, USD/CAD appears to be working toward the 1.40 level, although this is unlikely to be a clean or uninterrupted move. Based on historical behavior of this pair, such advances are rarely linear. There is no immediate inclination to short USD/CAD, as the market appears to be in a phase of defining its next broader range, with the 1.3750 level remaining a critical technical reference.
If USD/CAD manages to decisively clear the 1.40 handle, the next upside objective would be the 1.41 region. While this currency pair is known for its volatility, buyers currently retain control of price action. It is also notable that the US dollar has been strengthening not only against the Canadian dollar but also versus the euro, the pound, and several other major currencies. Overall, the outlook for USD/CAD remains constructive, even if near-term progress unfolds in measured stages rather than an explosive move.