USD/CAD: Cautiously Bullish, Waiting for a Decisive Break Above 1.3730

• USD/CAD experienced high volatility after the US postponed military strikes on Iran, leading to a “risk-on” sentiment shift.
• The resulting weakness in the US Dollar was offset by a massive ~7.5% drop in WTI crude oil, which prevented the commodity-linked CAD from making gains and left the pair flat near 1.3715.
• The bias is cautiously bullish, requiring a decisive break above the key technical level of 1.3730
• The pair’s movement will be governed by the 5-day US/Iran discussion window, further WTI price swings, and the potential for new US tariffs on EU goods.

USD/CAD had a wild ride today much like markets as a whole. Early in the session, the pair reached a fresh high of 1.3755, testing the peak set in January.

Following a major geopolitical headline, the pair plummeted to an intraday low of 1.3683, testing critical technical support. By the afternoon, the pair settled into a flat, rotational pattern near 1.3715, as the market balanced a weaker US Dollar against falling oil prices.

The Trump seesaw continues

The defining driver was President Trump’s announcement to postpone planned military strikes on Iranian energy infrastructure for five days. This triggered a “risk-on” sentiment shift, reducing the “war premium” and safe-haven demand that had been propping up the US Dollar.

Crude oil (WTI) fell nearly 12% immediately following the news, eventually stabilizing near $90 (a 7.5% intraday drop). Since the Canadian Dollar is a commodity-linked currency, the massive drop in oil prices offset the US Dollar’s weakness, preventing the CAD from making significant gains and leaving the pair “flat.”

Remarks from Fed officials provided a backdrop of caution. Governor Stephen Miran urged policy-making based on long-term trends rather than “short-term headlines,” while Chicago Fed President Austan Goolsbee warned that oil shocks remain “stagflationary,” suggesting rate cuts might not happen until late 2026.

Factors affecting USD/CAD moving forward

Moving forward, the pair will likely be influenced by several high-impact variables:

The five-day “window” established by the US for discussions with Iran will keep markets on edge. Any breakdown in talks or a resumption of strike threats would likely spike the USD and oil prices simultaneously.

As Canada is a major crude exporter, the CAD remains highly sensitive to WTI price swings. If oil recovers on supply concerns, the CAD could strengthen; if de-escalation continues, oil may fall further, weakening the Loonie.

Markets are closely watching for “proof of inflation” from the Fed. A hawkish stance from the Fed compared to a potentially more dovish Bank of Canada (BoC) would provide long-term upward pressure on USD/CAD.

Reports of potential 15–20% minimum tariffs on EU goods by the Trump administration suggest a continuing protectionist stance that could bolster the USD through trade-war risk appetite.

Technical Analysis – USD/CAD

Back to the technicals though and USD/CAD continues to test the 1.3730 key level.

The daily chart shows USD/CAD is struggling to gain acceptance and record a daily candle close above the 1.3730 key level.

If the pair does gain acceptance above this key level, there is a confluence area just beyond that where the 100-day (black) and 200-day (orange) MAs are converging near the 1.3800 handle.

The 200-day MA at 1.3803 represents a “line in the sand”, a break above this would signal a return to a long-term bullish bias.

Significant long-term support remains at 1.3501.

The Relative Strength Index (RSI) is sitting at 55.66, suggesting there is still room for further upside before the pair becomes overbought with momentum favoring bulls.

The bias is cautiously bullish but lacks conviction. A decisive break and hold above 1.3730 would likely trigger a run toward the 1.3800 handle. Conversely, if the pair drops below the moving average cluster at 1.3650, expect a move back toward the 1.3580 support zone.

USD/CAD Daily Chart, March 23, 2025

Source: TradingView.com (click to enlarge)