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Canadian Dollar moves little as traders adopt caution ahead of US-China summit

  • USD/CAD remains steady as traders await the high-stakes Trump-Xi summit.
  • Trump and Xi may lower tariffs on $30 billion of non-sensitive goods, excluding items vital to national security.
  • The commodity-linked CAD may weaken as falling oil prices reduce demand for Canada’s primary export.

USD/CAD remains calm after six days of gains, trading around 1.3700 during the Asian hours on Thursday. The pair stays silent as the US Dollar (USD) moves little as market caution prevails ahead of a pivotal summit in Beijing between US President Donald Trump and Chinese President Xi Jinping. Traders will also shift their focus to the US Retail Sales report for April due later in the day.

As the world’s two largest economies attempt to stabilize their relationship, they are reportedly considering a framework to reduce tariffs on roughly $30 billion worth of goods, excluding those tied to national security. However, geopolitical tensions remain a major factor. The summit is taking place against the backdrop of the war in Iran. Washington has recently increased pressure on Tehran by imposing new sanctions on entities involved in selling Iranian oil to China and threatening banks that facilitate those transactions.

On Wednesday, the US Bureau of Labor Statistics (BLS) reported that wholesale inflation hit its highest level since late 2022. The Producer Price Index (PPI) surged to 6.0% year-over-year (YoY) in April, up from 4.3% in March and well above the 4.9% expected by the market. On a monthly basis, PPI rose 1.4%, doubling the previous month’s 0.7% and far exceeding the anticipated 0.5% increase.

The USD/CAD pair may regain its ground as the commodity-linked Canadian Dollar (CAD) may lose ground amid lower oil prices, given Canada’s status as the largest crude exporter to the United States (US).

However, Oil supply concerns also loom over the market as the US Energy Information Administration (EIA) stated that crude and fuel flows through the Strait of Hormuz dropped by nearly 6 million barrels per day in the first quarter following the outbreak of the Middle East conflict in late February.

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Currency Talk – USDCAD, AUDUSD, EURNZD

Key takeaways

  • What is the technical outlook for USDCAD, AUDUSD and EURNZD?

This analysis from the Overbalance series aims to identify three financial instruments, analysed primarily on the daily/four-hour (D1/H4) timeframe. The analysis utilises only the Overbalance methodology, which helps to identify points where a trend may continue or where a reversal may occur. Today’s analysis covers three instruments, assessed solely in terms of 1:1 correction structures. USDCAD USDCAD prices remained in a downtrend throughout April, but in recent days the 1:1 downtrend pattern has been negated at the 1.3630 level, which, according to the Overbalance methodology, may signal a significant upward correction or even a trend reversal. Currently, the key support level remains at 1.3655, where the lower boundary of the local 1:1 pattern is located. As long as the price remains above this level, the bullish scenario remains in place. Conversely, a return below 1.3630, i.e. below the polarity of the previously negated pattern, could once again open the way for further declines.

USDCAD – H4 timeframe. Source: xStation AUDUSD The AUDUSD exchange rate has been on an upward trend since the beginning of April. The key support level for the exchange rate is currently 0.7170. According to the Overbalance methodology, as long as the price remains above this level, the upward trend remains in place.

AUDUSD – H4 chart. Source: xStation EURNZD Since 7 April, the EURNZD has been trading in a downtrend. Should the upward correction extend, the key resistance level remains at 1.9872. As long as the price stays below this level, the bearish scenario remains in place. Conversely, for a return to the uptrend to be considered, the price would need to rise above the 1.9969 level, where the polarity of the previously negated 1:1 upward geometry is located.

EURNZD – H4 timeframe. Source: xStation

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CAD remains depressed vs firmer USD; rising Oil prices limit further losses

  • USD/CAD trades with positive bias for the fourth straight day amid a broadly firmer USD.
  • Iran tensions and hawkish Fed expectations turn out to be key factors supporting the USD.
  • Rising Crude Oil prices could underpin the Loonie and cap further upside for spot prices.

The USD/CAD pair attracts some dip-buying following Friday’s late pullback from the vicinity of the 100-day Simple Moving Average (SMA) and climbs back closer to the 1.3700 during the Asian session on Monday. This marks the fourth straight day of a positive move – also the sixth in the previous seven – and is sponsored by a modest US Dollar (USD) strength.

The recent optimism over a potential US-Iran peace deal and the de-escalation of conflict faded rather quickly in the wake of renewed hostilities in the Strait of Hormuz. Adding to this, US President Donald Trump and Iran both rejected each other’s peace proposals for ending the war and the gradual reopening of the Strait of Hormuz amid major disagreements over Iran’s nuclear program. This keeps geopolitical risks in play and benefits the safe-haven USD, offering some support to the USD/CAD pair.

Meanwhile, persistent geopolitical uncertainties trigger a fresh leg up in Crude Oil prices, reviving inflationary fears. Adding to this, the upbeat US Nonfarm Payrolls (NFP) report, released on Friday, fuelled expectations for a more hawkish US Federal Reserve (Fed) and turned out to be another factor underpinning the Greenback. The Canadian Dollar (CAD), on the other hand, is weighed down by the disappointing monthly employment details, which showed that the Unemployment Rate rose to 6.9% in April.

That said, rising Crude Oil prices might hold back traders from placing aggressive bearish bets around the commodity-linked Loonie and cap any further upside for the USD/CAD pair. Even from a technical perspective, Friday’s failure ahead of the 100-day SMA makes it prudent to wait for a sustained strength above the said barrier before positioning for any further gains. In the absence of any relevant market-moving economic data, spot prices remain at the mercy of USD/Oil price dynamics.

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Trade of The Day – USD/CAD

Facts:

  • The pair is testing the +1 standard deviation line of the anchored VWAP, calculated from 2 January 2025
  • Canada is one of the world’s leading oil exporters

Recommendation:

  • Long position on USDCAD at market price
  • SL: 1.35575
  • Target Price: 1.38880

Opinion:

The USD/CAD pair is currently trading around 1.3647, within a support zone defined by key volume patterns from the volume profile built since the start of 2025. Both the Stop Loss (1.35575) and Take Profit (1.38880) levels have been set in relation to the largest volume clusters visible on the profile – zones of historically high market activity which act as strong technical barriers. The price is approaching the lower boundary of a multi-month consolidation phase, and the 1.3620–1.3660 zone has repeatedly acted as a support level triggering upward movements, which confirms the validity of opening a technical long position.

The key fundamental argument is the CAD’s dependence on oil prices – Canada is one of the leading exporters of crude oil, and the Canadian dollar functions de facto as a petrodollar, meaning that any further falls in oil prices directly weaken the CAD and support an increase in USD/CAD. Given the growing oversupply in the oil market and the expected increase in production by OPEC countries, the risk of continued pressure on oil prices remains real, which further favours the long side on this pair, following a fairly significant depreciation over the long term.

Although the money markets are pricing in a more hawkish shift in the Bank of Canada’s stance in the future compared to the current one, the spread in short-term yields between the US and Canada (1M: 3.64 vs. 2.25) still points to a carry trade in favour of the USD. However, we recommend exercising particular caution, as the fundamental environment for this pair may change rapidly and thus undermine the current basis for this recommendation.

Source: xStation

Methodology and assumptions:

The recommendation is based on a technical and fundamental analysis of the USD/CAD chart. Classical technical analysis was used to assess the situation and analyse the trend.

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The CAD remains flat as crude oil prices decline

  • The Canadian Dollar may weaken as falling oil prices pressure Canada’s crude-export-driven economy.
  • Oil prices fall as easing Middle East tensions reduce concerns over potential supply disruptions.
  • The US proposed to Iran a memorandum of understanding to gradually reopen the Strait of Hormuz.

USD/CAD remains flat after registering modest gains in the previous trading day, hovering around 1.3630 during the Asian hours on Thursday. The commodity-linked Canadian Dollar (CAD) may struggle amid lower oil prices, given Canada’s status as the largest crude exporter to the United States (US).

West Texas Intermediate (WTI) oil price extends its losses for the third consecutive day, trading around $92.60 per barrel at the time of writing. Crude oil prices depreciate on easing supply concerns amid prospects for a Middle East peace deal.

The BBC reported on Wednesday that Iran said a US proposal to end the war is “still being considered” after reports that the two countries could be close to an agreement. The US has presented a one-page memorandum of understanding to Iran that would gradually reopen the Strait of Hormuz and lift the American blockade on Iranian ports. Detailed talks on Iran’s nuclear program would come later in the process, the person said, adding that nothing has been agreed upon yet.

CNBC reported on Wednesday that US President Donald Trump said that Iran will be bombed “at a much higher level” if it doesn’t agree to a peace deal. Trump, in a Truth Social post, said the US military offensive known as Operation Epic Fury “will be at an end” if Iran “agrees to give what has been agreed to, which is, perhaps, a big assumption.”

The US Dollar could face challenges as easing concerns over price pressures could convince the US Federal Reserve (Fed) to cut the interest rate rather than keep policy restrictive for longer.

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Currency Talk – USD/CAD, NZD/USD, EUR/NZD

Key takeaways

  • What is the technical outlook for USDCAD, NZDUSD, and EURNZD?

This analysis from the Overbalance series aims to identify three financial instruments, analysed primarily on the daily/four-hour (D1/H4) timeframe. The analysis utilises only the Overbalance methodology, which helps to identify points where a trend may continue or where a reversal may occur. Today’s analysis covers three instruments, assessed solely in terms of 1:1 correction structures.

USDCAD

USDCAD prices have been on a downward trend since the beginning of April. The chart shows a 1:1 pattern with a range of around 80 pips. Although the latest pattern has been slightly breached, the price has not exceeded the 127.2% level, which, according to the Overbalance methodology, indicates that the downward trend remains intact. The current correction has stalled around 1.3630, where the upper boundary of the 1:1 pattern is located. Until this level is broken, the scenario of further declines remains in place.

USDCAD – H4 timeframe. Source: xStation

NZDUSD

Since 6 April, NZDUSD has been trading within a local uptrend. The lower boundary of the pattern at 0.5840 has recently been tested twice. This level was only slightly breached, but the price failed to return below the polarity of the previously negated downward pattern at 0.5828, which led to the emergence of another upward impulse. According to the Overbalance methodology, the uptrend remains in place, and the key support level remains at 0.5865, derived from the lower boundary of the green 1:1 pattern. The pattern remains valid as it has only been slightly breached but not negated.

NZDUSD – H4 chart. Source: xStation

EURNZD

Since 7 April, the EURNZD has been trading in a downtrend. The price attempted to break through the support level at 1.9969 on several occasions and eventually both broke through it and negated the 1:1 upward trend, confirming the bearish scenario. In the event of a correction, the key short-term resistance remains at 1.9930. If the downward movement continues, the lows from February and March at 1.9540 remain a potential target for selling.

EURNZD – H4 chart. Source: xStation

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Canadian Dollar gains ground as easing safe-haven demand weighs on US Dollar

  • USD/CAD weakens as the US Dollar softens amid optimism over a potential Tehran deal.
  • Defense Secretary Pete Hegseth said the US-Iran ceasefire holds despite Gulf clashes over the Strait of Hormuz.
  • The commodity-linked CAD may weaken as oil prices fall amid easing supply concerns on fading Middle East tensions.

USD/CAD extends its losses for the second successive day, trading around 1.3600 during the Asian hours on Wednesday. The pair retreats as the US Dollar (USD) softens on reduced safe-haven demand, driven by rising optimism over a potential deal with Tehran.

Washington announced an end to offensive operations against Iran and reaffirmed the ceasefire, with US Secretary of State Marco Rubio stating that “Operation Epic Fury is concluded,” adding that its objectives had been achieved.

However, US Defense Secretary Pete Hegseth said on Tuesday that the ceasefire with Iran was not fully settled, as both sides continued exchanging fire in the Gulf amid tensions over control of the Strait of Hormuz.

Losses in the USD/CAD pair may be capped, as the commodity-linked Canadian Dollar (CAD) may face pressure from weaker oil prices. West Texas Intermediate continues to decline, trading near $97.90 per troy ounce at the time of writing.

Oil prices are falling as supply concerns ease alongside fading Middle East tensions. US President Donald Trump stated that the US would temporarily pause efforts to help stranded vessels exit the Strait of Hormuz, allowing time to evaluate prospects for a deal with Iran to end the conflict.

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USD/CAD Price Forecast: Bulls hesitant above 1.3600 as Oil prices counter USD strength

  • USD/CAD stalls a two-day-old recovery move from a nearly two-month trough amid mixed cues.
  • Elevated Oil prices underpin the Loonie, while rising US-Iran tensions benefit the safe-haven USD.
  • The technical setup, too, warrants some caution before positioning for any meaningful upside.

The USD/CAD pair struggles to capitalize on a two-day-old recovery move from the 1.3550 area, or its lowest level since March 10, and oscillates in a range during the Asian session on Tuesday. Spot prices currently trade around the 1.3620 area amid a combination of diverging forces.

The risk of a further escalation of tensions in the Middle East amid the US-Iran standoff over the Strait of Hormuz acts as a tailwind for Crude Oil prices, which is seen underpinning the commodity-linked Loonie. This, along with the lack of follow-through US Dollar (USD) buying, keeps a lid on the USD/CAD pair. However, persistent geopolitical uncertainties and hawkish US Federal Reserve (Fed) expectations favor the USD bulls, backing the case for a further appreciating move for the currency pair.

The USD/CAD pair is holding a mildly bearish near-term bias as it remains capped beneath the 100-period Simple Moving Average (SMA) on the 4-hour chart. The said hurdle at 1.3650 coincides with the 23.6% Fibonacci retracement level of the late March-early May downfall and should act as a pivotal point. Momentum indicators are mixed, with the Relative Strength Index nearing the neutral territory at 51 and the Moving Average Convergence Divergence (MACD) marginally positive.

The technical setup, in turn, hints at fading downside pressure but not yet a clear bullish reversal while the USD/CAD pair trades below the aforementioned confluence hurdle. A sustained strength beyond, however, should pave the way for further gains towards the 38.2% retracement at 1.3710 and the 50.0% level at 1.3758. The momentum could extend further towards the 61.8% level at 1.3806, which is the prevailing supply zone on the topside.

On the downside, the next meaningful support aligns with the recent swing low around 1.3553, where buyers may attempt to rebuild a base should selling pressure resume.

(The technical analysis of this story was written with the help of an AI tool.)

USD/CAD 4-hour chart

Chart Analysis USD/CAD