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USD/CAD Price Forecast: Traders seem hesitant as Middle East tensions boosts USD and Oil

  • USD/CAD gains some positive traction on Monday, though it lacks bullish conviction.
  • Rising geopolitical tensions benefit the USD’s reserve currency status and lend support.
  • Surging Oil prices underpin the Loonie and might cap any further upside for spot prices.

The USD/CAD pair attracts some buyers at the start of a new week/month and reverses a major part of Friday's slide to a nearly two-week low. A dramatic escalation of geopolitical tensions in West Asia benefits the US Dollar's (USD) status as the global reserve currency and offers some support to the currency pair. However, a sharp rise in Crude Oil prices could underpin the commodity-linked Loonie and act as a headwind for spot prices.

The US and Israel launched a coordinated military strike on Iran on Saturday, killing Supreme Leader Ayatollah Ali Khamenei. In response, Iran launched a barrage of missiles that struck US bases and heavily populated civilian areas in US-allied countries across the Middle East, raising fears of a broader regional conflict. Adding to this, US President Donald Trump said more strikes would continue for as long as necessary, underscoring the risk of a prolonged war and sending shockwaves across the global financial markets. This forces investors to take refuge in traditional safe-haven assets, which pushes the USD to its highest level since January 22 and assists the USD/CAD pair in regaining some positive traction.

Meanwhile, Crude Oil prices surged to the highest level since June 2025 after Iran's Islamic Revolutionary Guards Corps (IRGC) announced the stoppage of shipments through the Strait of Hormuz. The critical maritime chokepoint is an important shipping channel for more than 20% of global oil, and the closure fuels concerns about some supply disruptions from the key producing region. This offsets the OPEC+ decision to increase their output by 206,000 barrels and leads to a sharp rise in the commodity. This, in turn, helps limit the downside for the Canadian Dollar (CAD) and acts as a powerful counterweight, effectively capping the USD/CAD pair’s intraday move up and creating a complex tug-of-war for traders.

Market participants now look forward to important US macro releases, scheduled at the start of a new month, starting with the ISM Manufacturing PMI later today. This will be followed by the ADP report on private-sector employment and ISM Services PMI on Wednesday, and the closely-watched Nonfarm Payrolls (NFP) report on Friday. The crucial data might influence the USD, which, along with Oil price dynamics and geopolitical developments, might contribute to infuse some volatility around the USD/CAD pair through the week.

USD/CAD 4-hour chart

Chart Analysis USD/CAD

Technical Analysis:

The near-term bias is mildly bearish as the USD/CAD pair holds below the gently declining 200-period Simple Moving Average (SMA) on the 4-hour chart at 1.3689, indicating sellers keep a slight advantage after the recent pullback from the 1.3710 area.

Meanwhile, the Relative Strength Index (RSI) has recovered toward 53 from near-oversold territory seen around 34, suggesting downside momentum is fading but not reversing decisively. The Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) remains marginally negative but edges toward the zero line, reinforcing a weak bearish tone rather than a strong trending move.

Initial resistance emerges at the 1.3690 region where price meets the 200-period SMA, followed by the recent swing highs around 1.3710, a break of which would open the way toward 1.3735.

On the downside, immediate support stands near 1.3658, the day’s open and a recent reaction low, with a deeper floor at 1.3630, where the latest downswing stalled as RSI approached oversold conditions. A sustained drop below 1.3630 would strengthen the bearish case toward 1.3600, while holding above 1.3658 keeps the pair in a soft range beneath the 200-period average.

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

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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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