✅ Overview
The USD/CAD pair has shown notable movement throughout May 2025, driven by economic data from both Canada and the U.S. A spike in Canada’s core inflation has reduced expectations of interest rate cuts by the Bank of Canada (BoC), while overall weakness in the U.S. dollar has added extra pressure to the pair.
📊 Fundamental Analysis
Recent data shows Canada’s core inflation has climbed above 3%, although headline inflation dropped to 1.7% due to lower energy prices. This mix has led traders to reconsider the chances of BoC easing rates, adding strength to the Canadian dollar.
(Source: Reuters)
At the same time, the U.S. dollar has softened as the Federal Reserve adopts a more cautious stance on the economy. Crude oil prices, one of Canada’s top exports, have also dipped slightly by 0.2%, settling around $62.56 per barrel — putting added weight on CAD strength.
📉 Technical Analysis
From a technical angle, USD/CAD has started to pull back after failing to breach the 1.40 psychological barrier. The pair has now broken below key support and is heading toward the 1.3750 zone, which could act as a potential pivot point.
Elliott Wave analysis suggests we may be in the midst of a corrective phase before another possible rally. Resistance levels to watch are 1.3911 and 1.4040, while short-term support lies near 1.3800.
(Source: RoboForex)
(Source: Forex.com)
💡 Trading Strategy Insight
Traders should keep an eye on key zones and upcoming BoC or Fed statements. Volatility will likely pick up around data releases or any major shifts in global sentiment. The market currently favors CAD strength, but momentum can shift quickly depending on the next macro move.
