During Thursday's Asian trading session, the USD/CAD pair extended its rebound, climbing for a second consecutive day, with the exchange rate hovering near 1.3680. Broad-based US dollar strength served as the primary catalyst for the pair's upward movement, as markets continued to scale back expectations for rapid interest rate cuts from the Federal Reserve within the year.

Recent remarks from Federal Reserve officials have reinforced this assessment. Fed Governor Lisa Cook stated that she does not support further rate cuts in the absence of clearer evidence of receding inflation, emphasizing that she is more concerned about a halt in the disinflation process than a cooling labor market.

This stance was interpreted by the market as a hawkish signal, prompting a continued adjustment in interest rate expectations toward a "slower, more cautious path of rate cuts." Concurrently, discussions surrounding potential leadership changes at the Fed also provided support for the US dollar.

Markets are focused on the potential implications of President Trump nominating Kevin Warsh for the role of next Fed Chair. Warsh has long advocated for reducing the balance sheet and holds a relatively cautious view towards aggressive rate cuts, which has deepened investor expectations for future monetary policy independence and a tightening bias.

However, Trump himself attempted to balance market interpretation. He stated that he would not nominate Warsh for Fed Chair if Warsh supported raising interest rates, reiterating that there remains room for rate cuts, citing the current level of interest rates as "too high" and the US economy as having "become wealthy again."

This rhetoric somewhat limited market pricing for an extreme hawkish scenario but did not reverse the US dollar's phase of strength. On the Canadian dollar side, its commodity-linked nature weighed on its performance.

International oil prices retreated after a previous consecutive rally, with WTI crude falling over 0.5%, thereby weakening external support for the loonie. The backdrop for the oil price decline was a temporary easing of geopolitical tensions.

Iran confirmed that it would hold talks with the United States in Oman this week, and a White House official also confirmed that the two sides would engage on a potential nuclear agreement, cooling market concerns about disruptions to crude oil supply. Under the combined influence of a stronger dollar and pressured oil prices, USD/CAD maintained its upward trajectory, with the short-term balance of power favoring the US dollar.

From a daily chart perspective, USD/CAD has stabilized and resumed its ascent after a previous pullback, with the price gradually moving away from recent lows, indicating that underlying buying support remains firm. Recent candles closing above the previous session's levels reflect a mending of short-term bullish momentum.

Regarding the moving average system, the exchange rate has climbed back above the short-term moving averages, which have begun to turn upwards, with the distance to the medium-term averages gradually narrowing. This change suggests that prior downward pressure has eased, and the price structure is transitioning from a weak correction to a stronger, consolidating phase.

The medium-term moving averages continue to provide support against pullbacks, indicating that the trend has not yet shown clear signs of weakening. For momentum indicators, the RSI has recovered from lower levels to near the neutral zone, not yet entering overbought territory, suggesting the current rebound is still in a technical correction phase without evident emotional overheating.

As long as the RSI remains above the mid-line, the exchange rate retains the potential for further gains. From a pattern perspective, the area around 1.3680 has become a key short-term observation zone. If the exchange rate can consolidate and operate above this area, the upside potential could open further.

Conversely, if the rebound momentum weakens and the price falls back below key support, the price action could revert to a range-bound pattern. Overall, the daily technical setup for USD/CAD leans towards stabilization and recovery, but it still requires fresh fundamental drivers to confirm the trend's continuity.

Editor's View: The core logic for USD/CAD has shifted from being purely Canadian dollar-focused back to being "dominated by US dollar policy expectations." Against the backdrop of continually delayed expectations for Fed rate cuts, the US dollar has found sustained support, while the pullback in oil prices has further amplified the Canadian dollar's passive weakness.

In the short term, as long as the US dollar maintains relative strength and oil prices struggle to rebound quickly, the downside for USD/CAD will be limited. However, considering that policy expectations remain subject to change, the exchange rate is more likely to exhibit a stronger, consolidating pattern rather than a one-way upward trend. The key still lies in observing whether the US dollar's strength is sustainable and if oil prices can find new drivers.