USD/CAD extends rally after breaking November high, hits 14-month peak

USD/CAD surged to a fresh 14-month high on Friday, extending its rally after breaking above the November peak. The pair touched 1.4177, marking the third consecutive week of gains for the US dollar against the Canadian dollar.

The Canadian dollar continues to weaken as it carves out fresh lows, driven by a combination of falling oil prices and disappointing domestic data. WTI crude oil has dropped nearly $8 this week, falling back to early-March levels as markets price in a rapid resumption of flows through the Strait of Hormuz following the end of hostilities. On the domestic front, Canadian retail sales for May rose only 0.5% overall, entirely driven by higher gasoline prices. Excluding gasoline and autos, sales fell 0.7%, highlighting a consumer hit hard by the spike in fuel costs. For forex traders, the continued USD/CAD rally reflects both the negative terms-of-trade shock for Canada as a major oil exporter and the widening interest rate differential between the US and Canada. Traders can track real-time USD/CAD movements on NowPrice's live forex dashboard to monitor key levels as the pair tests new highs.

Looking ahead, the focus will shift to upcoming Canadian GDP data and any further commentary from the Bank of Canada. The BoC has already signaled concern over the economic impact of high inflation and weak consumer spending, which could lead to a more dovish stance. On the oil side, any disruption to the anticipated resumption of Strait of Hormuz flows could provide temporary support for the loonie. However, as long as the US dollar remains supported by a hawkish Federal Reserve and risk-off sentiment, USD/CAD may continue its upward trajectory. Key resistance lies at the 1.4200 level, while support is seen near 1.4100.