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USD/CAD Price Forecast: Bulls seem hesitant ahead of Trump’s Hormuz deal deadline

  • USD/CAD regains positive traction as geopolitical risks revive demand for the safe-haven USD.
  • Inflation fears fuel Fed rate hike bets and further benefit the buck ahead of Trump’s deadline.
  • Rallying Oil prices underpin the commodity-linked Loonie and might cap gains for spot prices.

The USD/CAD pair attracts some dip-buyers near the 1.3900 mark on Tuesday and reverses part of the previous day's slide as fading hopes for a US-Iran ceasefire revive demand for the safe-haven US Dollar (USD). However, a fresh leg up in Crude Oil prices could lend some support to the commodity-linked Loonie and act as a headwind for the currency pair, warranting caution for bulls ahead of US President Donald Trump's deadline for Iran to reopen the Strait of Hormuz.

In fact, Trump heightened his harsh rhetoric and threatened to decimate Iran's civilian infrastructure if the deadline of Tuesday, 8 PM Eastern Time (00:00 GMT Wednesday) passes without a deal. Furthermore, Iran pushed back against pressure to reopen the strategic waterway and rejected a ceasefire proposal, instead emphasizing the necessity of a permanent end to the war. This, in turn, keeps nervous investors ‌on the sidelines and benefits the USD's reserve currency status, which is seen supporting the USD/CAD pair.

Meanwhile, the advisor to Iran's Parliament Speaker, Mohammad Bagher Ghalibaf, emphasized that Iran will not back down and said that Trump has about 20 hours to either surrender or his allies will return to the Paleolithic Age. This raises the risk of a further escalation of conflict in the Middle East and lifts crude oil prices closer to a four-week high set on Monday. Investors remain concerned that elevated energy prices will rekindle inflationary pressures, forcing the US Federal Reserve (Fed) to adopt a more hawkish stance.

Furthermore, the Institute for Supply Management (ISM) survey on Monday revealed that the Prices Paid Index surged to 70.7 in March, marking the highest since October 2022. This follows a rise in the Manufacturing Prices Index to 78.3, or the highest since June 2022, and points to a rapid acceleration of input costs for businesses. Furthermore, the upbeat US Nonfarm Payrolls (NFP) report released last Friday signaled a resilient labor market and boosted bets that the Fed will hold rates higher for longer to combat inflation.

The market attention now shifts to the release of the latest US consumer inflation figures, due on Friday, which will include the Middle East conflict period and allow investors to assess the effects of surging Oil prices. In the meantime, traders are pricing in the possibility of a Fed rate hike by the end of this year, which favors the USD bulls and suggests that the path of least resistance for the USD/CAD pair remains to the upside. Adding to this, persistent geopolitical uncertainties validate the near-term positive outlook.

USD/CAD daily chart

Chart Analysis USD/CAD

Technical Analysis:

Against the backdrop of the recent breakout through a technically significant 200-day Exponential Moving Average (EMA), the range-bound price action witnessed over the past two weeks or so might still be categorized as a bullish consolidation phase. Moreover, momentum remains positive, albeit less aggressive, with the Moving Average Convergence Divergence (MACD) line still above its signal and both above the zero line while the histogram contracts, suggesting fading upside pressure rather than a reversal.

That said, the Relative Strength Index (RSI) around 66 stays in positive territory but eases from overbought, indicating buyers retain control, although the latest leg higher looks stretched. Hence, it will be prudent to wait for a daily close above the immediate hurdle near 1.3950 before positioning for additional gains towards the 1.4000 psychological and then the 1.4080 as the next bullish target.

On the downside, initial support emerges at 1.3875, guarding a deeper pullback toward 1.3835 and then 1.3765, where previous consolidation and the longer-term average would be tested. A sustained break below 1.3765 would weaken the current bullish structure and open the way to 1.3680. Nevertheless, the broader upside scenario remains in place while the USD/CAD pair holds above 1.3835 on a closing basis.

(The technical analysis of this story was written with the help of an AI tool.)

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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