The Canadian dollar is catching its breath this week after a sharp multi-month climb. After gaining nearly 10 cents since early February, the USD/CAD pair is now drifting around the 1.3575 mark—stuck in limbo as traders await the next big move from the U.S. Federal Reserve and keep one eye on rising tensions in the Middle East.
U.S. Spending Slips, But Not Enough to Sway the Fed (Yet)
Tuesday’s update on American consumer spending painted a mixed picture. Overall sales fell more than expected in May—marking the biggest drop in over a year—but a core measure (the one that feeds into economic growth stats) actually rose.
So what does that mean? U.S. shoppers are slowing down, but they haven’t hit the brakes entirely. That gives the Fed more reason to stay patient. Rate cuts are still likely later this year, but probably not just yet. Markets are pricing in about two cuts by December, and all eyes are on Wednesday’s Fed statement to see if that changes.
Crude Prices = Quiet Support for the Loonie
One thing helping the Canadian dollar stay afloat? Oil. Global crude prices have jumped over 12% in the last week as tensions rise between Israel and Iran. That’s fueling safe-haven buying in commodities like oil and gold—and since Canada’s economy is heavily tied to energy exports, a stronger oil market tends to mean a stronger CAD.
That said, the CAD hasn’t taken off. It’s holding steady, likely waiting on two things: guidance from the Fed and more news out of the Middle East. For now, oil is helping the loonie hold its ground, even if it’s not pushing it higher.
USD/CAD: Still Sliding, But Losing Steam
From a technical perspective, USD/CAD is still trending lower—but the momentum has cooled. The pair is holding above 1.3540, a key support level that traders have defended multiple times this month. If that level breaks, we could see a drop toward the 1.34 zone, which hasn’t been tested since last fall.
On the flip side, if the U.S. dollar gets a lift after the Fed meeting, a bounce toward 1.3640 or 1.3710 wouldn’t be surprising. For now, the market is in “wait-and-see” mode, and volatility remains muted.
The Canadian dollar is currently trading at 1.3635 CAD against the US Dollar.
