Canadian Dollar seems vulnerable near April 2025 lows amid weak oil prices, bullish USD

The Canadian Dollar (CAD) appeared vulnerable as it neared April 2025 lows, influenced by weak oil prices and a strong US Dollar (USD). On Tuesday, USD/CAD briefly stalled at around 1.4265, retaining its upward trend since early April. The Bank of Canada's (BoC) dovish policies, combined with trade tensions between the US and Canada, contributed to the CAD's underperformance against the USD.

The situation was further exacerbated by geopolitical factors, including the ongoing Middle East conflicts, which bolstered the USD as a safe-haven currency.

Recent developments, such as Iran's potential attack and Yemen's Houthi group's ballistic missile strikes against Saudi Arabia, added to the geopolitical risks. Meanwhile, US inflation data and a weaker-than-expected Nonfarm Payrolls report dampened expectations of a Federal Reserve rate hike in October, somewhat tempering the USD's upward momentum. Despite this, many traders still anticipated an 80% chance of a Fed rate hike by the end of the year.

The technical analysis indicated that USD/CAD was above the 100-day Simple Moving Average (SMA) at 1.4003, supporting the near-term bullish outlook. However, overbought conditions were evident, with the Relative Strength Index (14) nearing 78. A potential corrective pullback might find support near the 1.4200 level, while a convincing break below could push the pair toward 1.4150-1.4145.

The Canadian Dollar's strength is contingent on factors such as the BoC's interest rate decisions, oil prices, Canada's economic health, inflation, and trade balance, as well as macroeconomic indicators and investor sentiment.