USD/CAD has weakened to approximately 1.4075 during the early European session on Friday. The bullish bias of the pair remains intact above the 100-day SMA; however, the possibility of further consolidation should not be dismissed given the neutral RSI momentum. The immediate resistance level is positioned at 1.4130, while the initial support level is observed at 1.4000. The USD/CAD pair is currently positioned in negative territory, hovering around 1.4075 during the early hours of trading in Europe on Friday. Escalating conflicts in the Middle East are driving up crude oil prices, thereby bolstering the commodity-linked Canadian Dollar against the US Dollar.
Oil prices surged following the assault by Yemen’s Iran-backed Houthi rebels on oil tankers in the Red Sea, which poses a significant risk to a crucial export route utilised by Saudi Arabia to circumvent the Strait of Hormuz. US President Donald Trump stated that the United States would hold Iran accountable for the actions of the Houthis and cautioned that both Iran and its Houthi allies would soon face a “major military punishment.” Canada stands as a significant player in the oil-exporting arena, and elevated crude oil prices typically exert a favourable influence on the Loonie. The preliminary readings of the US S&P Global Purchasing Managers Index are set to capture attention later on Friday. If the report indicates stronger-than-anticipated results, this may assist in curbing the Greenback’s declines in the short term.
In the daily chart, USD/CAD maintains a bullish sentiment, with the price remaining above the 100-day Simple Moving Average. However, the pair slips back under the 20-day Bollinger SMA, signalling a loss of immediate topside traction following the recent spike. The 14-day Relative Strength Index at 47.9 is positioned just below the midline, indicating a state of directionless momentum in the near term, as neither bulls nor bears are presently in control. On the topside, initial resistance is positioned at the 20-day Bollinger SMA around 1.4130, followed by a more formidable barrier at the upper Bollinger Band near 1.4262. On the downside, the lower Bollinger Band at approximately 1.4000 serves as the initial support level, while the 100-day SMA at 1.3875 provides additional reinforcement for a more substantial demand zone should selling pressure persist.
Strategists at Scotiabank emphasise a more optimistic stance from US officials regarding the recent tariff measures, observing that US Trade Representative Greer “offered some hope that the latest tariff blast from Washington would not undermine US/Canada trade relations in the long run and that talks could make progress towards a broader agreement before year-end.” This, they suggest, aids in alleviating market anxiety regarding the bilateral trade outlook, even as currency markets persist in following the overarching trend of the US Dollar.