USD/CAD Price Forecast: Eyes further losses as Hormuz risks support Oil prices and USD

The USD/CAD pair is prolonging its recent corrective decline from the year-to-date high, reached in March, and drifting lower for the fourth consecutive day on Thursday. This also marks the eighth day of a negative move in the previous nine and drags spot prices to the lowest since March 24 during the early European session. Crude Oil prices build on the previous day's goodish recovery from a three-week trough and gain some positive traction amid the instability in the Strait of Hormuz. This, in turn, is seen underpinning the commodity-linked Loonie and weighing on the currency pair, though a modest US Dollar (USD) recovery helps limit the downside.

The Strait of Hormuz and Lebanon remain primary flashpoints in a fragile ceasefire between the US and Iran. In fact, the US naval blockade of Iranian ports, imposed after the end of talks in Pakistan last Saturday, has been fully implemented. The leader of Iran’s joint military command said that its military could halt trade in the Gulf region if the US does not lift its blockade. Iran has also demanded an end to Israeli attacks on Lebanon as a precondition for further negotiations with the US. However, Israel's Prime Minister, Benjamin Netanyahu, indicated that he had not committed to a ceasefire and said that he had instructed the IDF to continue thickening the security zone. This keeps geopolitical risks in play, which acts as a tailwind for Crude Oil prices and the safe-haven USD.

Meanwhile, investors remain hopeful that the door for Iran diplomacy remains open. In fact, US President Donald Trump said that he believes the war with Iran may be coming to a conclusion soon, while the White House expressed optimism about reaching a deal to end the conflict. Moreover, reports suggest that there are growing prospects for a second round of peace talks between the US and Iran that could take place in a matter of days. The optimism remains supportive of a generally positive risk tone. Moreover, the US Producer Price Index (PPI) released earlier this week eased concerns about the inflationary impact of the war-driven surge in energy prices and tempered hawkish Fed expectations. This might keep a lid on any meaningful USD recovery and favors the USD/CAD bears.

USD/CAD 4-hour chart

Technical Analysis:

The USD/CAD pair maintains a mildly bearish near-term bias as it holds beneath the 200-period Simple Moving Average (SMA) at 1.3762 and the 50% Fibonacci retracement of the March upswing. This overhead confluence suggests rebounds are likely to face supply. Meanwhile, the Relative Strength Index (RSI) around 36 indicates weak but stabilizing momentum, while  the Moving Average Convergence Divergence (MACD) remains marginally negative. This hints that downside pressure is easing rather than reversing decisively.

On the topside, initial resistance is located at the 50% Fibo. level at 1.3747, followed closely by the 200-period SMA at 1.3762. A sustained break above this band would open the way toward the 38.2% retracement at 1.3800 and then the 23.6% level at 1.3865. On the downside, support emerges first at the 61.8% Fibo. retracement at 1.3695, with deeper cushions at 1.3619 (78.6%) and 1.3524 (the swing low), where sellers would likely become more cautious.

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