USD/CAD forecast: US dollar goes from strength to strength as 1.40 barrier breaks

Written by

Fawad Razaqzada

Market Analyst

Thu, 11 Jun 2026, 03:56 PM

The USD/CAD has hit the 1.40 handle today, as we had expected. The move is a reflection of strengthening US dollar amid growing inflation risks and an overall soft appetite for risk. While the stock markets were attempting to stabilise after a sharp sell-off on Wednesday, I am not convinced the bulls are in a rush to jump back in. As we have seen repeatedly in the last few days, early strength has been faded in the second half of the day. Are we going to see another such scenario this time too? If so, the USD/CAD could climb further above the 1.40 handle. We maintain a bullish short outlook on the USD/CAD forecast heading into the FOMC meeting next week.

US inflation is accelerating

Supporting the dollar has been strong employment data as we saw last week and the renewed upsurge in inflation.

On Wednesday, we saw US CPI accelerated in May to 4.2% year-over-year from 3.8% in April. Today’s producer price data was mixed: Headline PPI came in above expectations at 6.5% compared to 6.4% expected, although the core reading was a bit softer than forecast.

Still, both measures of inflation suggest price pressures are accelerating again. The concern for the markets is that higher energy prices could keep inflation elevated even longer and force the Fed (and other central banks) to keep interest rates high for an extended period of time.

Middle East re-escalation further boosts US dollar’s appeal

Tensions in the Middle East have escalated once again, unfortunately. The US carried out further military operations inside Iran, and Tehran has responded with attacks on US military bases in the region. And now, President Trump has warned that the US could hit Iran “very hard tonight” and suggested key oil infrastructure could become a target.

Oil prices initially surged on supply concerns before pulling back slightly. However, the latest escalation could keep prices elevated, which may limit risk appetite and underpin the US dollar.

Bank of Canada remains modestly bearish

Meanwhile, the USD/CAD barely reacted to the Bank of Canada’s policy announcement yesterday. The BOC is still a bit dovish as it is 'looking through' inflation unlike some of the other banks like the ECB, which delivered an insurance hike today. The BOC’s stance should keep the downward pressure intact on the CAD, unless incoming economic data improves markedly.

USD/CAD forecast: Technical analysis and levels to watch

From a technical analysis point of view, the USD/CAD continues to print bullish price action. We had already expected USD/CAD to break the 1.4000 handle, which it has now reached. This follows the sharp recovery that we’ve seen since the early parts of May and the fact that, around the end of May and the start of June, USD/CAD climbed above the 200-day moving average and held above it.

More recently, it climbed above the 1.3870 area, which had previously acted as both support and resistance. Once that level was crossed, the pair continued to accelerate to the upside.

The key question now is whether it can extend its gains toward the November highs at 1.4140 and potentially head above that zone. With the underlying trend remaining bullish, we maintain a positive outlook on the USD/CAD forecast. As things stand, and for as long as key levels continue to be defended, the path of least resistance remains to the upside.

Among the levels to watch are the high from the end of March at 1.3967, while the high of the hammer candle that formed on Wednesday comes in at 1.3955. The zone between these two levels needs to hold to keep the bullish trend intact.

In terms of the next area of resistance, we have resistance around the 1.4100 handle to keep an eye on. Above that, there is not much in the way of obvious resistance until the November high at 1.4140. Beyond that, should we get there, the next focus will be the 1.4500 handle.

Meanwhile, the 21-day exponential moving average has crossed above the 200-day moving average, which is another indication that the trend is gathering momentum, objectively providing a bullish signal on this currency pair.