USD/CAD Weakens Toward 1.3900 as US Economic Concerns Mount

USD/CAD Weakens to Near 1.3900 as US Economic Concerns Deepen

The USD/CAD currency pair extended its decline early Wednesday during the Asian session, slipping to around 1.3910. The weakening US Dollar (USD) continues to struggle under the weight of fiscal concerns and cautious sentiment in global markets, while the Canadian Dollar (CAD) finds support from rising crude oil prices.

The renewed pressure on the Greenback comes in the wake of Moody’s recent downgrade of the United States’ sovereign credit rating. The cut, which lowered the US rating from AAA to AA1, has amplified investor concerns about growing fiscal imbalances, persistent deficits, and policy uncertainty—especially as markets adjust to potential longer-term implications of trade protectionism and spending plans under President Donald Trump.

“The Moody’s downgrade was the catalyst earlier, pushing yields higher and the dollar lower. Now yields have pulled back from their peaks and the dollar remains lower,” said Vassili Serebriakov, currency strategist at UBS in New York.

Adding to the pressure on USD/CAD, crude oil prices are staging a moderate rebound. As oil is one of Canada's top exports, higher prices typically benefit the Canadian Dollar. The commodity-linked Loonie has thus gained traction as energy markets stabilize and geopolitical risks continue to linger.

Looking ahead, traders will closely monitor a scheduled speech by Federal Reserve official Thomas Barkin later in the day. Any signals regarding future interest rate policy or concerns over inflation and economic slowdown could further influence the trajectory of the USD.

Technical Outlook

From a technical standpoint, USD/CAD remains under bearish pressure, with short-term momentum favoring further downside. A firm break below the 1.3900 psychological level could open the door for further declines toward the 1.3840 support zone.

Resistance is now seen near 1.3960–1.3980, where sellers have been active in previous sessions.

Key Drivers Moving Forward

• US fiscal outlook and political risks
• Oil price volatility and its effect on CAD
• Fed communications and rate expectations
• Broader risk sentiment and safe-haven flows

As long as concerns over US fiscal health persist and commodities continue to support the Loonie, USD/CAD could remain on the defensive in the near term.