During Friday's Asian trading session, the USD/CAD pair halted its decline and rebounded, with the exchange rate rising to around 1.3820, ending a four-day consecutive losing streak. This recovery was primarily driven by a combination of falling oil prices and a stabilizing US dollar.
Fundamentally, the Canadian dollar, as a typical commodity currency, is highly correlated with crude oil price movements. Recent significant volatility in international oil prices, following a short-term ceasefire agreement between the US and Iran, has eased market concerns over supply disruptions, leading to a notable decline in oil prices. WTI crude oil recorded a weekly drop of over 11.5%, directly pressuring the Canadian dollar and providing upward momentum for USD/CAD.
However, uncertainties remain in the Middle East. Israel continues military operations against targets in Lebanon and has explicitly stated it will not cease strikes against related armed forces. Simultaneously, transportation issues in the Strait of Hormuz have not been fully resolved, posing a potential threat to global energy supplies. The market estimates that the Strait of Hormuz handles approximately 20% of global seaborne crude oil shipments, meaning its transportation conditions will directly impact oil price trends. Therefore, despite the short-term decline in oil prices, medium-to-long-term rebound risks persist.
Additionally, market surveys indicate that the US has confirmed it will promote negotiations between Israel and Lebanon in Washington next week. This news has somewhat alleviated market tension, but overall uncertainty remains high as conflicts continue.
On the macroeconomic front, market attention is focused on the upcoming US March CPI data. Inflation is expected to rise due to energy price fluctuations, which could influence the Federal Reserve's policy path. Previously released meeting minutes showed that the Fed is currently adopting a wait-and-see approach while acknowledging that inflation risks from energy prices are becoming more balanced. This suggests that policy direction will still depend on subsequent data performance.
Technically, daily chart analysis indicates that USD/CAD has stabilized and rebounded from a key support area after consecutive declines. The 1.3700 level serves as a significant support zone, where buying interest emerged, signaling a short-term halt to the downtrend. If the exchange rate can sustain above 1.3850, it may further test 1.3900 or higher levels. Conversely, a break below 1.3700 could resume the downward trend. Momentum indicators show the RSI recovering from low levels and MACD bearish momentum weakening, indicating reduced downward pressure.
In the 4-hour timeframe, USD/CAD exhibits a consolidation and recovery pattern. After breaking through a short-term descending trendline, the pair entered a rebound channel, with short-term moving averages beginning to turn upward. The RSI has risen to near 50, reflecting a balance between bullish and bearish forces, while the MACD is gradually approaching the zero line, suggesting improved short-term momentum. A break above the 1.3850 resistance level could strengthen the rebound; however, if rejected, the pair may continue to fluctuate within a range.
Current USD/CAD movements are primarily driven by both oil prices and the US dollar. Sharp declines in oil prices have weakened support for the Canadian dollar, while risk aversion and inflation expectations bolster the US dollar. In the short term, technical rebound signals have emerged, but sustainability will depend on oil price trends and US CPI data outcomes. If oil prices rebound further or inflation falls below expectations, USD/CAD may face renewed pressure; otherwise, the rebound trend could continue.
Comments