USD/CAD Price Forecast: Bulls target 100-day SMA as hawkish Fed expectations underpin USD

The USD/CAD pair builds on the previous day's goodish rebound from the 1.3670 area, or a one-week low, and attracts buyers for the second straight day on Tuesday. Spot prices climb to a two-month high during the early part of the European session amid a firmer US Dollar (USD). However, a fresh leg up in Crude Oil prices underpins the commodity-linked Loonie and caps the upside for the currency pair.

Iran denied that talks with the US are taking place, contradicting President Donald Trump's remarks on Monday that the US had held productive conversations with Iran and that a deal could be reached soon. Moreover, Mohsen Rezaei, the senior military adviser to Iranian Supreme Leader Mojtaba Khamenei, said that the war will continue until Iran receives full compensation for the damage it has sustained. Meanwhile, reports of strikes on Iran’s energy infrastructure raise the risk of a further escalation of tensions in the Middle East and assist Crude Oil prices to regain positive traction following the previous day's downfall to a nearly two-week low.

According to the Iranian semi‑official Fars news agency, a gas company office and a pressure‑reduction station were hit in Iran’s central city of Isfahan. Adding to this, a projectile reportedly struck a gas pipeline feeding a power station in Khorramshahr. Moreover, a severe disruption of energy trade due to the effective closure of the Strait of Hormuz supports crude oil prices. This revives inflation fears and reaffirms hawkish Federal Reserve (Fed) expectations. In fact, the CME Group's FedWatch Tool indicates minimal to no chance of a rate cut by the end of this year. The outlook leads to a modest rise in US Treasury bond yields and underpins the USD.

Nevertheless, the aforementioned mixed fundamental backdrop and the lack of strong follow-through buying warrant some caution before placing aggressive bullish bets around the USD/CAD pair. Traders now look forward to the release of the flash US PMIs for a snapshot of the business activity in the manufacturing and services sectors, which should help investors to assess the health of the economy and provide some impetus. The focus, however, will remain glued to developments surrounding ongoing conflicts in the Middle East, Crude Oil prices, and expectations about the Fed's future policy path.

USD/CAD daily chart

Technical Analysis:

The recent breakout through the 1.3700 strong horizontal barrier was seen as a key trigger for the USD/CAD bulls. Any further move up, however, is likely to confront stiff resistance near a technically significant 100-day Simple Moving Average (SMA), currently pegged ahead of the 1.3800 round figure.

Moreover, the Moving Average Convergence Divergence (MACD) indicator holds in positive territory with the MACD line above the signal line, reinforcing building upside momentum despite the modest slope. The Relative Strength Index (RSI) hovers near 59, showing firm bullish momentum without overbought conditions, which supports the case for additional upside as long as pullbacks remain shallow.

Some follow-through strength beyond the 100-day SMA hurdle near the 1.3800 would open the way toward the 1.3850 region as the next upside objective. On the downside, initial support stands near 1.3680, with a deeper floor around 1.3640, where previous reaction lows align with minor consolidation. A break below 1.3640 would weaken the nascent bullish structure and expose the pair to a broader retracement toward 1.3590.

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