USD/CAD Price Forecast: Profit-taking kicks in as Iran de-escalation hopes weigh on USD

The USD/CAD pair extends the previous day's retracement slide from the 1.3965 area, or a nearly four-month high, and attracts some follow-through sellers for the second consecutive day on Wednesday. President Donald Trump stated on Tuesday that he expects the US to wrap up its military operation against Iran within two to three weeks and added that Tehran does not have to make a deal for him to end the war. The optimism, in turn, drags the US Dollar (USD) away from the year-to-date, touched on Tuesday, and turns out to be a key factor exerting pressure on spot prices.

Meanwhile, easing geopolitical tensions trigger a further pullback in Crude Oil prices, which undermines the commodity-linked Loonie during the first half of the European session and could help limit any further losses for the USD/CAD pair. That said, reports suggest that the United Arab Emirates (UAE) is pushing for military action to reopen the Strait of Hormuz – a crucial oil chokepoint – by force. Furthermore, additional US troops are heading to the Middle East to reinforce around 50,000 service members already stationed across the region. The development raises the risk of a broader conflict and should act as a tailwind for the black liquid, keeping inflation concerns and Federal Reserve (Fed) rate hike bets in play. This could benefit the Greenback and support the currency pair.

Traders also seem reluctant and opt to wait for Trump's address to the nation, later today at 9 PM EDT (01:00 GMT on Thursday, to update the public on the Iran war. In the meantime, the US macro data – the ADP report on private sector employment, monthly Retail Sales figures, and the ISM Manufacturing PMI – and speeches by influential FOMC members would drive the USD demand. The focus, however, remains on geopolitical developments, which, along with Oil price dynamics, might continue to infuse volatility in the financial markets. Furthermore, the closely watched US Nonfarm Payrolls (NFP) report, due on Friday, should provide a fresh impetus to the USD/CAD pair.

USD/CAD daily chart

Technical Analysis:

The recent breakout through a technically significant 200-day Simple Moving Average (SMA) was seen as a key trigger for bullish traders. The subsequent move up, however, struggles to find acceptance above the 1.3920-1.3925 horizontal barrier. This, in turn, warrants some caution before positioning for any further appreciating move.

Moreover, the Relative Strength Index (RSI) has eased from overbought territory above 70 to the high-60s, indicating strong but cooling upside pressure rather than an outright reversal signal. That said, the Moving Average Convergence Divergence (MACD) histogram remains in positive territory after a sustained run of higher readings, suggesting buyers retain control despite a slight loss of momentum.

Initial support emerges at 1.3810, where recent lows converge with the 100-day SMA, followed by deeper backing near 1.3725 if a corrective pullback extends. On the upside, immediate resistance is located at the recent high around 1.3925, and a daily close above this barrier would open the path toward the 1.4000 region next. As long as the pair holds above 1.3810 on a closing basis, the technical structure favors dips being absorbed by buyers rather than marking a trend change.

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