- USD/CAD regains positive traction as sustained safe-haven flows continue to benefit the USD.
- Supply disruption worries remain supportive of elevated Oil prices, underpinning the Loonie.
- Traders now look to the US macro data, though the focus remains on geopolitical developments.
The USD/CAD pair attracts fresh buyers following the previous day’s late pullback from the highest level since January 23 and climbs back closer to the 1.3700 mark during the Asian session on Wednesday. Spot prices, however, remain confined in a range held over the past two weeks or so, warranting caution for bullish traders amid a combination of diverging forces.
The US Dollar (USD) continues with its relative outperformance on the back of sustained safe-haven flows, bolstered by rising geopolitical tensions in the Middle East. Furthermore, traders have been trimming their bets for three interest rate cuts by the US Federal Reserve (Fed) amid concerns about sticky inflation, which turns out to be another factor supporting the buck. The USD Index (DXY), which tracks the Greenback against a basket of currencies, retains its bullish bias below its highest level in over three months and acts as a tailwind for the USD/CAD pair.
Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) announced that the Strait of Hormuz is closed for shipping traffic and warned that any vessel attempting to pass through the strategic waterway would be set on fire. The closure of the strait, which is one of the world’s most critical oil transit routes, threatens global supply and keeps the black liquid within striking distance of the highest level since June 2025. This, in turn, underpins the commodity-linked Loonie and holds back traders from placing aggressive bullish bets around the USD/CAD pair.
Market participants now look forward to the US economic docket – featuring the release of the ADP report on private-sector employment and the ISM Services PMI. The reaction to the data, however, is more likely to be muted as the focus remains glued to geopolitical developments. Moreover, the aforementioned mixed fundamental backdrop makes it prudent to wait for strong follow-through buying before positioning for any further appreciating move for the USD/CAD pair.
