The USD/CAD currency pair traded subduedly around 1.3836 during the European session on Tuesday, reflecting a cautious market environment as investors monitored developments in US-Iran relations and their impact on oil prices and the US Dollar [1][3]. The US Dollar Index (DXY) was reported 0.1% lower near 99.08, with the US Dollar facing selling pressure despite recent safe-haven flows triggered by escalating tensions in the Middle East [1]. According to Source 3, the US Dollar Index had risen more than 0.2% on Monday, and the price of West Texas Intermediate (WTI) crude oil surged nearly 5% after Iran threatened to block the Strait of Hormuz and the Bab El-Mandeb Strait, following the suspension of negotiations with the US in protest against attacks on Lebanon [3].
Technical analysis indicates that USD/CAD maintains a bullish near-term bias, trading above its 20-day exponential moving average (EMA) at 1.3771, with the Relative Strength Index (RSI) around 63, suggesting firm but not overbought momentum [1]. Immediate support is seen at the 20-day EMA, with a break below potentially leading to a deeper correction toward the May 20 low at 1.3731. On the upside, a move above the May 28 high at 1.3870 could open the way to the March 31 high at 1.3967 [1].
Strategists at OCBC maintain a neutral stance on the US Dollar, expecting a firm but rangebound profile supported by resilient US growth and sticky inflation [2]. They note that a potential US-Iran deal reopening the Strait of Hormuz would be USD-negative via lower oil prices, but any downside should be limited by US economic outperformance [2]. OCBC forecasts Brent crude near USD80/bbl by year-end, with upside risks, and expects USD terms of trade support to fade only slowly [2].
Market sentiment remains cautious, with US stock index futures trading marginally lower as investors await key data releases, including the US JOLTS Job Openings for April [1][3]. According to Source 3, the US Dollar was the strongest against the New Zealand Dollar this week, while the Canadian Dollar underperformed against several major currencies [3].
There are conflicting reports regarding the status of US-Iran negotiations: Source 1 states that Iran's negotiating team has stopped exchanging messages with the US, while Source 3 cites CNN reporting that negotiations were back on track hours after the suspension [1][3].
CONCLUSION
USD/CAD remains stable amid heightened geopolitical tensions and oil price volatility, with technicals favoring a bullish bias as long as key support levels hold. While a potential US-Iran deal could pressure the US Dollar via lower oil prices, analysts expect any downside to be limited by US economic resilience. Market participants are adopting a cautious stance as they await further developments and key economic data.