USD/CAD traded in a bullish consolidation during Thursday’s Asian session, holding around 1.4230–1.4225 and sitting just shy of Wednesday’s peak, its highest level since April 2025. Activity slowed as markets waited for the US Personal Consumption Expenditures (PCE) Price Index, while a modest US Dollar pullback from its highest level since May 2025 followed a paring back of expectations for further Federal Reserve rate increases. A slide in crude oil back to pre-Iran levels has eased inflation concerns, but softer oil prices have continued to weigh on the commodity-linked Canadian dollar, helping to cap downside in the pair.
Technically, the move above the November 2025 high near 1.4130 has reinforced the upward trend, with the Moving Average Convergence Divergence (MACD) remaining in positive territory. Momentum, however, looks stretched: the Relative Strength Index (RSI) is around 88, implying overbought conditions. The setup points to potential near-term consolidation or a corrective dip, although directional bias remains upward; buying interest is indicated around 1.4200, with 1.4130 acting as a key level.
Market Drivers and Central Bank Expectations
We see the USD/CAD pair consolidating its gains around the 1.4350 level, holding steady after a strong upward push. Traders are now in a holding pattern ahead of the crucial US Personal Consumption Expenditures (PCE) Price Index data, which is set to be released this Friday, June 26. This key inflation report will likely dictate the US Dollar’s next move and create volatility.
Our view is shaped by shifting central bank expectations and commodity prices. The latest data from the CME FedWatch Tool shows markets are pricing in a 92% chance the Federal Reserve will hold interest rates steady at its next meeting, easing some upward pressure on the dollar. However, with WTI crude oil prices struggling to hold above $78 a barrel, the commodity-linked Canadian dollar remains weak, providing a floor for the USD/CAD pair.
Technical Setup and Trading Strategy
From a technical perspective, the breakout above the November 2025 high of 1.4130 remains a powerful bullish signal for us. While the Moving Average Convergence Divergence (MACD) indicator confirms positive momentum, the Relative Strength Index (RSI) is still high at 75. This reading suggests the market is overbought, and a brief pullback or consolidation is likely before the next leg up.
For the coming weeks, we believe it is wise to wait for a corrective decline before adding bullish exposure. A good strategy could be to sell out-of-the-money put options with a strike near the 1.4200 mark to take advantage of high volatility and define a favorable entry point. This allows us to collect premium while waiting for the overbought conditions to ease before the uptrend potentially resumes.
