• USD/CAD struggles to capitalize on its weekly gains amid a combination of diverging forces.
• Geopolitical risks support crude oil prices, underpinning the Loonie and capping the major.
• Fed hike bets act as a tailwind for the USD and spot prices amid US-Canada trade tensions.

The USD/CAD pair is seen consolidating near the weekly high and trading around the 1.3875-1.3880 region during the Asian session on Thursday amid mixed fundamental cues.

Despite the optimism over the reopening of the Strait of Hormuz, the protracted Russia-Ukraine war keeps a floor under crude oil prices. This is seen offering some support to the commodity-linked Loonie, though US-Canada trade tensions keep a lid on any meaningful gains. Furthermore, the slightly hot US inflation data released on Wednesday keeps Federal Reserve (Fed) rate hike bets on the table, which helps the US Dollar (USD) preserve overnight gains and acts as a tailwind for the USD/CAD pair.

The Russia-Ukraine war has entered a new phase, with both countries causing destruction with long-range drones and missiles. Ukraine’s attacks this week included a drone strike that caused a massive fire at one of Russia’s largest oil refineries, near Nizhny Novgorod, on Wednesday. Meanwhile, Iran and Oman have agreed on shipping routes through the Strait of Hormuz, though Tehran warned that the waterway will not fully reopen. This, in turn, is seen lending some support to crude oil prices.

Meanwhile, the US Commerce Department reported on Wednesday that the Personal Consumption Expenditures (PCE) Price Index rose 3.7% over the 12 months through July, unchanged from the previous month. The reading, however, was above consensus estimates and pointed to still sticky inflation, backing the case for policy tightening by the US Federal Reserve (Fed). Moreover, the geopolitical risk premium remains in play, supporting the buck and the USD/CAD pair.

Traders also seem reluctant to place aggressive directional bets and opt to wait for more cues about the Fed’s future policy path. Hence, the focus will remain glued to Fed Chair Kevin Warsh’s scheduled speech at the Jackson Hole Symposium on Friday. In the meantime, Thursday’s release of the usual Weekly Initial Jobless Claims could influence the USD. Apart from this, oil price dynamics might provide some impetus to the USD/CAD pair and contribute to producing short-term trading opportunities.

USD/CAD 4-hour chart

Technical Analysis

The USD/CAD pair keeps a mildly bearish near-term tone under the 100-period Simple Moving Average (SMA) on the 4-hour chart, at 1.3902. Moreover, price action suggests upside attempts remain capped by this overhead level, leaving spot prices vulnerable to further consolidation or a corrective pullback.

However, a sustained break above this barrier would ease the current downside bias and open the way for a stronger recovery toward the next relevant hurdle near the 1.3955-1.3960 horizontal zone.