Published: 13 February 2026,08:35
Daily Market Analysis New
*Rising crude prices amid Middle East tensions have revived the Canadian dollar’s petrocurrency appeal, offsetting trade-related headwinds.
*With inflation contained within target and USMCA uncertainty lingering, the Bank of Canada is likely to maintain its 2.25% rate for now.
*Sustained geopolitical risk and firm crude prices could keep CAD supported, while any sharp pullback in oil would expose underlying vulnerabilities.
Market Summary:
The Canadian dollar is navigating a mixed near-term environment as of February, yet it has demonstrated surprising resilience against its G10 peers. While the currency was previously hampered by bilateral trade uncertainty with the United States and the drag of lackluster crude oil prices, the dynamic has shifted. As a major oil exporter with strong historical ties to energy markets, the loonie is now finding firm footing as crude prices climb back toward multi-month highs on renewed geopolitical risks in the Middle East, particularly concerning Iran .
This resurgence in oil prices has helped offset persistent headwinds from US-Canada trade friction, including the upcoming USMCA review, which the Bank of Canada itself has highlighted as a significant source of uncertainty . The central bank’s January 28 policy decision, in which it held the overnight rate steady at 2.25%, reflected a deliberate pause amidst this unpredictable environment. Governor Tiff Macklem emphasized that while the current policy rate remains appropriate, elevated uncertainty makes it difficult to predict the timing or direction of the next move .
On the inflation front, Canada’s price pressures remain relatively stable, with CPI registering at 2.4% in December and core measures easing toward 2.5% . This trajectory keeps inflation within the Bank’s 1% to 3% target band and reinforces the case for a prolonged hold. The market’s perception is therefore justified: the Bank of Canada is likely to remain on hold at 2.25% for the foreseeable future, balancing tolerable inflation against an economy adjusting to structural trade disruptions and tepid growth.
Looking ahead, the loonie’s near-term trajectory is increasingly tethered to the path of crude oil. With Middle East tensions showing few signs of imminent resolution and the Strait of Hormuz remaining a flashpoint, the risk premium embedded in oil prices is likely to persist, providing a supportive undercurrent for the currency . As long as oil holds its recent gains, the Canadian dollar is positioned to trade firmer against its peers, supported by steady interest rate differentials and the reassertion of its long-dormant petrocurrency status at these price levels .
Technical Analysis
The USDCAD pair has established a constructive bottoming structure, forming a double-bottom price pattern that signals a potential reversal of the prior downtrend. This formation, characterized by two distinct troughs at a similar support level followed by a recovery, suggests that selling pressure has been exhausted and buyers are beginning to assert control. The subsequent technical rebound from this base has brought the pair to a critical technical juncture: a well-defined liquidity zone near the 1.3670 level.
This area represents a significant pool of resting orders and previous price congestion, making it a natural magnet for price action and a likely source of short-term resistance. The market’s behavior at this level will be decisive. A clean rejection following a liquidity grab—a swift move into the zone to trigger stops and resting liquidity before reversing—would signal that the bearish undertow remains dominant, reinforcing the corrective nature of the current rally within a broader downtrend. Conversely, a decisive and sustained breakout above the 1.3670 liquidity zone would constitute a powerful bullish confirmation signal, validating the double-bottom reversal and suggesting the pair is positioned for a more sustained recovery toward higher resistance targets.
Resistance Levels: 1.3680, 1.3760
Support Levels: 1.3580, 1.3463
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