The USD/CAD pair continues to decline, falling below the 1.3700 level and reaching its lowest level since October 2024. This movement is driven by the overall weakening of the U.S. dollar amid concerns about the worsening fiscal situation in the United States and expectations of further interest rate cuts by the Federal Reserve.

The main factors weighing on the dollar include the rising U.S. national debt, associated with large-scale tax cuts and increased government spending, which could add approximately $4 trillion to the budget deficit over the next 10 years. Additionally, softer Consumer Price Index (CPI) and Producer Price Index (PPI) data point to easing inflationary pressures, reinforcing expectations of Fed rate cuts to support the economy.

At the same time, the Canadian dollar is receiving support from stronger-than-expected core inflation data in Canada, which reduces the likelihood of a rate cut by the Bank of Canada in June. Despite a moderate decline in oil prices—which typically negatively affects the Canadian dollar due to its commodity-linked nature—strong inflation figures continue to support the loonie, contributing to the further decline of the USD/CAD pair.

Overall, the combination of a weak U.S. dollar and resilient Canadian economic indicators suggests a continuation of the downward trend for USD/CAD in the near term.

From a technical perspective, oscillators on the daily chart remain in negative territory, confirming the bearish outlook. However, it is worth noting that the Relative Strength Index (RSI) is approaching oversold territory, indicating a possible consolidation phase for the pair. Therefore, bearish traders should exercise caution.