During Friday's Asian trading session, the USD/CAD pair continued its decline, hovering around the 1.3700 level and marking its fifth consecutive day of downward pressure. The weakening exchange rate is primarily attributed to rising crude oil prices boosting the commodity-linked Canadian dollar, while the U.S. dollar, although supported by safe-haven demand, exhibits limited overall momentum.
From a fundamental perspective, the Canadian dollar's movement is closely tied to oil prices. As the largest exporter of crude oil to the United States, Canada's economy is highly sensitive to energy price fluctuations. Currently, WTI crude oil is holding near $90 per barrel, mainly underpinned by supply concerns. Markets are closely monitoring developments in the Middle East, particularly ahead of U.S.-Iran negotiations, prompting a widespread cautious stance among investors.
Although a 10-day ceasefire agreement has been reached between Israel and Lebanon, the situation remains unstable. The Lebanese military reported multiple violations after the truce took effect, noting intermittent shelling continues in some areas. This reinforces market worries about potential supply disruptions, thereby supporting oil prices.
Concurrently, U.S. President Donald Trump stated he has communicated with Lebanese President Joseph Aoun and Israeli Prime Minister Benjamin Netanyahu, confirming the ceasefire arrangement. The U.S. and Iran are expected to resume talks over the weekend, with Trump expressing optimism about reaching a long-term agreement.
However, the market remains cautious regarding the negotiation outcome. On one hand, any progress in talks could ease supply risks and weigh on oil prices. On the other hand, until results are clear, risk-off sentiment continues to support the U.S. dollar index. This uncertainty lends short-term resilience to the dollar, thereby limiting the downside for USD/CAD. Market structure suggests USD/CAD is currently in a typical "dual-driver pattern": oil price strength pushes the loonie higher, while safe-haven demand supports the greenback. The exchange rate has found a temporary equilibrium near 1.3700, indicating a balance between bullish and bearish forces.
At the global market level, volatility in energy prices is influencing inflation expectations in major economies. Rising oil prices could fuel inflation, thereby affecting central bank policy paths—a factor indirectly impacting currency markets through interest rate expectations.
Investor sentiment is clearly tilting toward caution. In the near term, trading logic revolves more around geopolitical developments and oil price movements rather than being driven solely by economic data. This event-driven characteristic makes sustained trending less likely, with range-bound oscillation being the more probable scenario for the exchange rate.
Technically, on the daily chart, USD/CAD has retreated from higher levels, shifting its overall structure from a previous uptrend to a weaker, consolidating phase. The price has broken below short-term moving average support, with momentum indicators showing bearish forces gradually strengthening, though a one-sided trend has not yet formed. Key support levels lie in the 1.3680 and 1.3650 zones; a break below could lead to a test of 1.3600. Resistance is seen near 1.3740 and 1.3780; if rebounds falter there, the pair may extend its corrective decline. On the 4-hour chart, the pair is moving within a descending channel with lower highs. Short-term moving averages are arranged bearishly, the RSI is below 50, and the MACD remains under the zero line, indicating a short-term bias to the downside, though downward momentum has slowed, suggesting a possible consolidation phase ahead.
In summary, the current USD/CAD trend is influenced by both oil prices and risk sentiment. Higher oil prices bolster the Canadian dollar, while geopolitical uncertainties provide a floor for the U.S. dollar, preventing a clear directional move. In the short term, market focus will remain on U.S.-Iran negotiations and Middle East developments. If oil prices continue to strengthen, the pair could decline further; however, if safe-haven demand intensifies, the U.S. dollar may regain dominance. Overall, USD/CAD is more likely to maintain a weak, oscillating pattern.