USDCAD Eye a Deeper Pullback as Oil & Dollar Momentum CoolsUS Dollar/Canadian DollarFX:USDCADultreosforexUSDCAD, After a sharp rebound toward 1.4020, USD/CAD is showing signs of exhaustion as selling pressure re-emerges at the top of the recent range. With oil prices stabilizing near mid-60s and the Bank of Canada signaling patience amid weak but steady domestic data, the pair faces the risk of another leg lower toward 1.39 and possibly 1.38 if U.S. data underperforms. Current Bias Bearish – USDCAD is holding below key resistance at 1.4030, with price action suggesting a potential correction toward 1.3910 and 1.3810 in the short term. Key Fundamental Drivers Oil Recovery: Crude oil has rebounded from recent lows, supporting the Canadian dollar and easing upward pressure on USD/CAD. Divergent Central Bank Tone: The Fed remains cautious on cuts, while the BoC maintains a “wait and assess” stance, reflecting a balanced policy gap that limits upside for USD/CAD. Data Softness: Canada’s growth data remains sluggish, but labor market strength offsets deeper pessimism. Meanwhile, U.S. consumer and manufacturing resilience keeps USD demand steady. Yield Differentials: Modest narrowing between U.S. and Canadian yields favors mild CAD appreciation if risk sentiment holds stable. Macro Context U.S. economy continues to show solid momentum, though some leading indicators are flattening. Fed officials, including Logan and Schmid, have signaled that rates are restrictive enough but still not ready for aggressive cuts. In Canada, Q2 GDP showed contraction, but employment and wage data suggest the downturn is shallow. The BoC remains cautious, preferring stability over immediate easing. Oil’s moderate rebound and stable export demand provide underlying CAD support. Globally, energy market stabilization and China’s steady PMI data are limiting risk-off flows, reducing USD’s haven premium. Primary Risk to the Trend A sudden decline in oil prices or a hawkish shift from the Fed could reignite USD strength and push USD/CAD back toward 1.41+. Conversely, an unexpected BoC hawkish tone or strong Canadian employment data could accelerate the downside. Most Critical Upcoming News/Event U.S. ISM Manufacturing and Services PMI U.S. Non-Farm Payrolls and CPI data Canada Employment Report and Ivey PMI BoC’s Business Outlook Survey Leader/Lagger Dynamics USD/CAD typically acts as a lagger to broader USD trends but a leader among commodity-linked currencies (AUD/CAD, NZD/CAD). Oil and Treasury yield moves drive its direction, while DXY strength or weakness sets the overall bias. Key Levels Support Levels: 1.3910, 1.3810 Resistance Levels: 1.4030, 1.4080 Stop Loss (SL): 1.4070 (above structural resistance) Take Profit (TP): 1.3810 (lower support confluence) Summary: Bias and Watchpoints USDCAD carries a bearish bias as short-term momentum fades below 1.4030. The combination of firmer oil prices, a steady BoC stance, and a cooling dollar backdrop sets the stage for a pullback toward 1.3910 and potentially 1.3810. Traders should watch for confirmation from upcoming U.S. ISM and jobs data, which could either reinforce the correction or restore USD dominance. A stop above 1.4070 helps protect against sudden yield-driven spikes, while 1.3810 remains the key target zone aligned with both technical structure and the evolving macro narrative.