USD/CAD Drops to 1.3825 as Weak USD and Strong CAD Pressure Pair

USD/CAD Falls to 1.3825 Region, Back Close to Two-Week Low on Weak USD

The USD/CAD currency pair slid back toward its two-week low on Friday, reaching the 1.3825 mark during early Asian trading. The move reflects renewed selling interest in the pair amid broad-based US Dollar (USD) weakness and supportive Canadian Dollar (CAD) fundamentals.

USD Pressured by Fiscal Concerns and Dovish Fed Sentiment

The greenback is on the defensive as markets remain concerned over the fiscal impact of President Donald Trump’s newly passed budget bill—dubbed the "Big, Beautiful Bill"—which is expected to significantly widen the US budget deficit. Despite stronger US economic data earlier in the week, these fiscal worries, along with expectations for Federal Reserve interest rate cuts, have weighed heavily on the USD.

Last week’s softer US Consumer Price Index (CPI) and Producer Price Index (PPI) data fueled speculation that the Fed could move toward monetary easing in the coming months. Fed officials have continued to maintain a cautious tone, further reinforcing a dovish market outlook.

Canadian Dollar Strengthened by Oil and Rate Expectations

On the other hand, the Canadian Dollar is benefiting from a combination of stronger domestic data and commodity price support. Canadian core inflation data released on Tuesday exceeded expectations, dampening market hopes for a Bank of Canada (BoC) rate cut in June. This has lent underlying strength to the CAD.

Meanwhile, crude oil—Canada’s key export—has stabilized following a brief retracement earlier in the week. Geopolitical easing around US-Iran nuclear talks and speculation that OPEC+ may consider increasing output in July helped stabilize oil prices, indirectly boosting the oil-linked CAD.

Technical Levels to Watch

• Support: 1.3820, 1.3785
• Resistance: 1.3865, 1.3900

The pair remains vulnerable to further downside as long as it stays below the 1.3865 resistance. A break below 1.3820 could open the door for a move toward 1.3785 or lower.

Traders will continue to monitor developments related to US fiscal policy, commentary from Federal Reserve officials, and movements in crude oil markets for direction. With the Canadian economy showing resilience and the US Dollar under broad pressure, the short-term outlook for USD/CAD remains bearish.