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USDCAD Drops 4 Week Low: Will the Bank of Canada Rate Decision Drag Even Lower Today?

Sarah Thompson
Sarah Thompson
Lead Forex Strategist & Financial Writer
2 hours ago
USD/CAD Hits 4-Week Low as BoC Rate Decision Looms
Summary
  • USD/CAD trades near 1.4040, a four-week low, as of the Asian session
  • Higher crude oil prices and softer US CPI are the two main drivers
  • The Bank of Canada interest rate decision and Monetary Policy Report are today's biggest event risks

Why Is USD/CAD Falling Right Now?

The pair is under pressure from a mix of a firmer Canadian Dollar and a softer US Dollar. Here are the key drivers:

Rising Crude Oil Prices

Crude oil climbed to a near one-month high as Middle East tensions and Strait of Hormuz disruptions revived supply worries. Because Canada is one of the largest crude exporters to the United States, stronger oil usually lifts the commodity-linked Loonie and pushes USD/CAD lower.

Softer US Inflation

The US Consumer Price Index (CPI) fell 0.4% in June, the largest monthly drop since April 2020. Cooler inflation trimmed expectations for further Federal Reserve (Fed) rate hikes, leaving the US Dollar (USD) on the back foot.

Shifting Rate-Hike Bets

The CME FedWatch Tool showed a 51% chance of a September Fed rate hike versus a 23% chance of no change. Any repricing here tends to move the Dollar quickly.

Technical Indicators

USD/CAD is retracing from its highest level since April 2025, printed last month, and the short-term bias has tilted lower.

  • Support: 1.4040, the current four-week low
  • Resistance: 1.4150, near this week's earlier range

“For the Canadian dollar, developments should bring some relief from the recent downward pressure against the U.S. dollar,”  

-said, Shaun Osborne, chief currency strategist at Scotiabank

What Should Traders Do Now?

Two Bank of Canada events land together today and both matter for the Canadian Dollar. The first is the interest rate decision on the benchmark overnight rate. The second is the quarterly Monetary Policy Report (MPR).

  • A rate hike tends to make the CAD more attractive to foreign investors chasing higher returns, which can lift the currency and push USD/CAD lower.
  • A hawkish or upbeat monetary policy can support the CAD, while a dovish or cautious outlook can weigh on it.
  • Track US PPI and Fed Chair Kevin Warsh's second day of congressional testimony for US Dollar direction.
  • Spreads can widen and volatility can spike around these releases, so many traders wait for the dust to settle before committing to new positions.
Sarah Thompson

About the author:

Sarah Thompson

Lead Forex Strategist & Financial Writer

Sarah Thompson is a professional Forex trader with over 7 years of experience in the financial markets. She specializes in Forex trading strategies, technical analysis, Gold and Indices market trends, risk management, and performance evaluation. Since joining SureShotFX in 2021, Sarah has authored numerous in-depth articles, reports, and insights for traders of all experience levels.

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