The USD/CAD pair maintained a narrow trading range around 1.3810 during the Asian session on Wednesday. Market sentiment is currently influenced by progress in US-Iran negotiations, fluctuations in international oil prices, and expectations for upcoming Canadian economic data. Among major currencies, the Canadian dollar has shown relative stability, trading weakly against the New Zealand dollar while largely consolidating against the US dollar, euro, and British pound.
Recent developments in the Middle East remain a central focus for global markets. Attention continues on negotiations between the US and Iran regarding a long-term ceasefire and the resumption of normal shipping traffic through the Strait of Hormuz. Although Iran has accused the US of recent military strikes, US Central Command has described these actions as "defensive," aimed at protecting US forces from threats by Iranian armed groups.
Simultaneously, the latest reports from Iran indicate that, with Qatar's mediation, the two sides are close to resolving issues related to Iran's frozen assets. The market interprets this as a sign that the US and Iran are nearing a final agreement. The Strait of Hormuz handles approximately 20% of global seaborne crude oil shipments. Consequently, the market widely believes that if normal transport resumes in the region, global energy supply risks could significantly ease.
This expectation has also contributed to a recent slowdown in the rally of international oil prices. For the Canadian dollar, changes in oil prices are crucial, as Canada is a major global crude oil exporter. Typically, rising oil prices support the Canadian dollar, while a decline may limit its performance. However, with oil prices still at relatively high levels, the Canadian dollar continues to receive some support from the energy market.
Meanwhile, the direction of the US dollar continues to impact the USD/CAD pair. The US dollar remains supported by safe-haven demand and expectations that the Federal Reserve will maintain high interest rates, limiting the pair's near-term downside. The market still assigns a high probability to the Fed keeping rates elevated this year. Concerns about inflation driven by rising international oil prices have led to cautious market views on the Fed's future policy path.
Nevertheless, as US-Iran negotiations show some progress, market worries about severe energy supply disruptions have eased, which also curbs further expansion of safe-haven buying for the US dollar. Domestically in Canada, market focus has shifted to the upcoming GDP data. Investors are assessing whether the Canadian economy can sustain its growth momentum.
The market anticipates that Canada's monthly GDP growth rate may slow to 0.1% from the previous 0.2%. However, on an annualized basis, Canada's first-quarter GDP is expected to grow by 1.5%, a significant improvement from the previous contraction of 0.6%.
If the Canadian GDP data exceeds market expectations, the Canadian dollar could gain further support. Conversely, weak economic data may renew concerns about a slowdown in the Canadian economy. The future policy path of the Bank of Canada is also under market scrutiny. With overall inflation in Canada having moderated, the market is observing whether the Bank of Canada might gradually shift to a more accommodative policy stance in the future.
From a broader market perspective, the USD/CAD pair is currently influenced by the dual factors of "changes in international oil prices" and "expectations for high US interest rates." On one hand, elevated oil prices support the Canadian dollar; on the other, the Fed's hawkish expectations continue to bolster the US dollar.
From a technical standpoint, the daily chart for USD/CAD still maintains a medium-term consolidation with a slightly bullish bias. The pair continues to trade above its major moving averages, indicating that the US dollar retains a certain advantage. The MACD indicator remains in positive territory, but the red momentum bars are beginning to narrow, suggesting a slowdown in upward momentum. The RSI indicator hovers around 56, reflecting a neutral-to-bullish market sentiment. Key resistance levels above are seen at 1.3860 and 1.3920; a decisive break above these could lead to a test of higher levels. Important support levels are located near 1.3760 and 1.3700.
The 4-hour chart shows that USD/CAD has entered a short-term consolidation phase, with prices fluctuating narrowly around short-term moving averages. The MACD indicator is gradually approaching the zero line, indicating unclear short-term direction. Meanwhile, the RSI indicator remains around 50, reflecting a relative balance between bullish and bearish forces. If Canadian GDP data is strong and international oil prices remain high, the Canadian dollar could push the pair lower. However, if the US dollar continues to be driven by safe-haven demand, USD/CAD may retest the 1.39 level.
Currently, investors are closely monitoring the progress of US-Iran negotiations, the trajectory of international oil prices, and the performance of Canadian GDP data. The market continues to observe future policy changes from the Federal Reserve and the Bank of Canada to determine the next directional move for the USD/CAD pair.
The USD/CAD market is currently in a balancing phase between "expectations of easing energy market tensions" and "support from high US interest rates." Progress in US-Iran negotiations has alleviated some market concerns about global energy supply disruptions, providing some support for the Canadian dollar. However, expectations of the Fed maintaining high interest rates and US dollar safe-haven demand continue to limit the pair's downside. At the same time, the performance of Canadian economic data will also be a key variable influencing the Canadian dollar's movement. Future market direction will largely depend on international oil prices, Canadian GDP data, and developments in the Middle East situation. In the short term, USD/CAD may continue to trade within a range of 1.37 to 1.39.