The USD/CAD currency pair reached a fresh two-month high at 1.3900 during the Asian trading session on Monday, marking a five-day streak of gains as the US Dollar (USD) benefited from increased safe-haven demand amid escalating conflicts in the Middle East involving the United States, Israel, and Iran [1]. The US Dollar Index (DXY) traded almost flat, slightly above 100.00, but remained close to its two-week high of 100.35, reflecting continued strength in the Greenback [1].
Market participants responded to reports from the Wall Street Journal that the US Pentagon is planning to send 10,000 additional troops to Iran for a ground invasion, intensifying geopolitical tensions [1]. In reaction, Iran’s Brigadier General Ebrahim Zolfaqari issued a warning on Iranian state TV, stating, “US troops will be good food for sharks of the Persian Gulf” [1].
Higher oil prices are expected to limit downside risks for the Canadian Dollar (CAD), as Canada is the largest exporter of oil to the US and rising oil prices are generally favorable for the Loonie [1]. Despite this, the USD/CAD pair remains bullish, trading above the rising 20-day Exponential Moving Average (EMA) and showing strong upside momentum, with the 14-day Relative Strength Index (RSI) jumping above 70.00, indicating stretched momentum after a sharp move from mid-month lows [1].
Technical analysis suggests initial support at 1.3750, aligning with the 20-day EMA, and deeper pullback support at 1.3700. Immediate resistance is at 1.3895, with a break potentially opening the way toward an over three-month high of 1.3930. Only a daily close below 1.3760 would weaken the bullish structure and shift focus toward the 1.3700 region [1].
CONCLUSION
The USD/CAD pair has surged on heightened geopolitical tensions and safe-haven flows, with technical indicators pointing to continued bullish momentum. While higher oil prices may support the Canadian Dollar, the prevailing risk environment favors further upside for USD/CAD unless key support levels are breached. Market participants should monitor developments in the Middle East and oil price movements for potential shifts in direction.