Canadian Dollar stands firm near two-week high vs weak USD amid bullish oil prices

The USD/CAD pair remains under some selling pressure for the second straight day on Friday, trading around the 1.4175-1.4170 region during the Asian session and close to an over two-week low set the previous day. Spot prices seem poised to register weekly losses, and a combination of negative factors backs the case for further depreciation.

The US Dollar (USD) prolongs this week's sharp retracement slide from the highest level since April 2025 for the third consecutive day and fails to gain any respite from US Federal Reserve (Fed) Chair Kevin Warsh's neutral remarks, which did little to alter monetary policy expectations. That said, declining US bond yields keep USD bulls on the defensive. Meanwhile, crude oil prices hold steady near a three-week top, which, along with a hawkish shift in Bank of Canada (BoC)  Governor Tiff Macklem's tone, underpins the commodity-linked Loonie and exerts pressure on the USD/CAD pair.

In fact, Macklem said at the Annual Meetings of the International Monetary Fund and World Bank Group that it is harder to look through a rise in energy prices for longer. This, in turn, suggests that the BoC could consider raising the key policy rates rather than cutting them. However, the US-Canada trade tensions might hold back traders from placing aggressive bullish bets on the Canadian Dollar (CAD). Moreover, the growing acceptance that the US central bank will raise borrowing costs again in December, along with escalating Middle East conflicts, could support the buck and the USD/CAD pair.

The hot US Consumer Price Index (CPI) and Producer Price Index (PPI) reports, released this week, pointed to broadening price pressures beyond energy products, underpinning prospects for further Fed tightening. On the geopolitical front, the Iran-backed Houthi group carried out a deadly missile attack targeting Aden's presidential palace, the seat of Yemen's Saudi-backed and internationally recognised government. Moreover, the US-Iran standoff over the Strait of Hormuz backs the case for the emergence of some USD dip-buying and warrants caution for USD/CAD bears.

USD/CAD 4-hour chart

Technical Analysis

The USD/CAD pair trades maintains a constructive bullish tone above the 23.6% Fibonacci retracement at 1.4173. Moreover, spot prices hold above a dense band of underlying Fibonacci levels between the 38.2% retracement at 1.4094 and the 50.0% retracement at 1.4030, while the 100-period Exponential Moving Average (EMA) on the 4-hour chart, at 1.4186, now acts as nearby overhead resistance. This points to a market that is grinding higher but faces a cap unless this barrier is decisively overcome.