USD/CAD Price Forecast: Bulls seem hesitant as oil prices rally on failed US-Iran talks

The USD/CAD pair attracts fresh sellers following an intraday move higher at the start of a new week and now seems to have stalled its recovery move from sub-1.3800 levels, or a nearly two-week low set on Friday. The failed US-Iran peace talks over the weekend triggered a sharp intraday rally in Crude Oil prices, underpinning the commodity-linked Loonie. The US Dollar (USD), on the other hand, struggles to build on its bullish gap-up opening amid hopes that the door for diplomacy with Iran remains open. This turns out to be a key factor exerting downward pressure on the currency pair through the early European session.

Despite nearly 21 hours of intense discussions, high-level US-Iran negotiations in Pakistan ended without a breakthrough or an agreement. US Vice President JD Vance said that he placed a final and best offer on the table, but Iran declined to accept the terms, leading to a stalemate. Iranian state media said that excessive demands sank the possibility of a deal. Adding to this, US President Donald Trump said that the US Navy would start blockading the Strait of Hormuz, jeopardizing a fragile two-week ceasefire. This comes on top of Israeli strikes in Lebanon and keeps geopolitical risks in play, providing a strong boost to West Texas Intermediate (WTI) – the benchmark US Crude Oil price – on Monday.

Meanwhile, the Wall Street Journal, citing officials familiar with the matter, reported that regional countries are racing to bring the US and Iran back to the negotiating table within days. This helps ease market concerns about a re-escalation of tensions in the Middle East and caps the upside for the safe-haven USD. However, expectations that the war-driven surge in energy prices will rekindle inflationary pressures and force the US Federal Reserve (Fed) to adopt a more hawkish stance warrant caution for the USD bears. Moreover, data released on Friday showed that inflation in the US surged by the most in nearly four years and led Investors to abandon bets on Fed rate cuts and shift focus to potential rate hikes this year.

The outlook, in turn, remains supportive of elevated US Treasury bond yields and favors the USD bulls, warranting caution before positioning for any meaningful depreciating move for the USD/CAD pair. There isn't any relevant market-moving economic data due for release on Monday, either from the US or Canada, leaving spot prices at the mercy of the USD and Oil price dynamics. Moreover, the incoming geopolitical headlines might continue to infuse volatility across the global financial markets and contribute to producing some meaningful trading opportunities.

USD/CAD daily chart

Technical Analysis:

The USD/CAD pair showed some resilience below the very important 200-day Simple Moving Average (SMA) last week and rebounded from the 38.2% Fibonacci retracement level of the March upswing. This suggests that the broader uptrend is still intact even as the Moving Average Convergence Divergence (MACD) turns slightly negative and hints at waning upside momentum. The Relative Strength Index (RSI) around 55, however, keeps a slight bullish tilt, indicating that buying pressure persists but lacks strong conviction for now.

This, in turn, suggests that the USD/CAD pair is more likely to find initial support at the 200-day SMA near 1.3818, which is followed by the 38.2% Fibo. retracement at 1.3797. A deeper pullback, however, would expose the 50.0% level at 1.3745 and then the 61.8% retracement at 1.3693, where buyers would be expected to re-emerge to protect the broader bullish structure. On the topside, immediate resistance is located at the 23.6% Fibo. retracement at 1.3862, with a break above opening the way toward the recent cycle high around 1.3966.

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

In the daily chart, USD/CAD trades at 1.3846, holding a mild bullish bias as it consolidates just under the 23.6% Fibonacci retracement at 1.3862. The pair remains supported by a dense structural floor formed by the 38.2% retracement at 1.3797 and the 200-day Simple Moving Average (SMA) at 1.3818,