USD/CAD pushed to its highest level since April 2025, supported by a firmer US Dollar and softer Oil prices that weighed on the Canadian Dollar. The pair was trading near 1.4235, while the US Dollar Index (DXY) sat around 101.64, last seen in May 2025. Rate expectations also diverged: markets have leaned towards potential Federal Reserve tightening later this year, while the Bank of Canada maintained a steady policy stance, leaving the cross underpinned.
Oil’s retreat added to CAD pressure after the Strait of Hormuz began reopening following a 60-day memorandum of understanding, unwinding most of the US-Iran war-related gains. West Texas Intermediate (WTI) traded around $70.35, its lowest since early March. On the chart, USD/CAD held above the 50-, 100- and 200-day SMAs clustered between 1.3769 and 1.3830; MACD stayed positive, but the RSI at 88 pointed to extreme overbought conditions. Support levels were cited at 1.4110, then 1.4000 and 1.3830–1.3770, with resistance at 1.4300.
Fundamental Drivers and Policy Divergence
Based on the current situation as of June 24, 2026, the fundamental case for a higher USD/CAD remains firmly intact. We see the policy divergence between a hawkish Federal Reserve and a steady Bank of Canada as the primary driver. The latest U.S. inflation data for May, coming in at 3.1%, supports the Fed’s resolve to maintain a tight policy, strengthening the US Dollar.
The Canadian dollar continues to face pressure from falling crude oil prices, with West Texas Intermediate now struggling to hold the $70 per barrel mark. This is compounded by Canada’s own inflation rate, which eased to 2.2% last month, giving the Bank of Canada no reason to alter its current course. These factors create a clear path of least resistance upwards for the currency pair.
Derivatives Strategy and Technical Considerations
For our derivatives strategy, we are looking to buy USD/CAD call options to capitalize on the expected continuation of this uptrend. However, with the Relative Strength Index (RSI) sitting at an extremely overbought level of 88, initiating new long positions right now is risky. We must wait for a temporary pullback to find a more favorable entry point.
We are targeting the 1.4110 area, or even the psychological 1.4000 level, to begin buying 30-to-60 day call options. A dip to these support levels would alleviate the overbought conditions and present a much better risk-reward opportunity. This patient approach allows us to join the dominant trend without chasing the peak of the current rally.
Historically, periods of significant monetary policy divergence, such as in 2015, have pushed USD/CAD much higher but were always marked by sharp, short-term corrections. For instance, in late 2015 the pair climbed from 1.38 to over 1.46 but experienced several pullbacks of 200-300 pips along the way. This historical behavior reinforces our strategy to view any upcoming price weakness as a buying opportunity.
