USD/CAD eased a few pips from its Asian-session peak and traded near 1.3860–1.3855, up about 0.15% on the day. It followed a modest rebound from below 1.3800 after a two-week low on Friday.
The US dollar failed to build on a weekly gap opening as reports said regional countries were trying to return the US and Iran to talks within days. Higher crude prices supported the Canadian dollar and limited gains in USD/CAD.
Oil Markets Drive Cad Support
WTI rose back to about $105 a barrel after US-Iran talks over the weekend ended without agreement. US Vice President JD Vance said a “final and best offer” was rejected, while Iranian state media cited what it called excessive demands.
US President Donald Trump said the US Navy would start blockading the Strait of Hormuz, putting a two-week ceasefire at risk. Continued Israeli strikes in Lebanon also raised fears of wider conflict and helped keep oil prices firm.
US inflation data on Friday showed the biggest monthly rise in nearly four years during March. Higher energy prices led markets to drop expectations for Fed rate cuts and shift towards possible rate rises this year, pushing up US Treasury yields.
The USD/CAD pair is holding near the 1.3850 mark, showing the strain between a strong US Dollar and high oil prices. This fundamental conflict suggests caution, as the pair could break out sharply from its recent recovery. We see this as a critical inflection point for the coming weeks.
Fed Expectations Support Usd
Crude oil prices are providing a significant tailwind for the Canadian dollar, capping the pair’s upside. West Texas Intermediate (WTI) is currently trading above $95 a barrel, its highest level in over a year, following renewed tensions in the Red Sea and OPEC+ confirming it will maintain production cuts through the second half of the year. This continued strength in energy underpins the value of the commodity-linked loonie.
On the other hand, bets on a hawkish Federal Reserve are keeping the US Dollar well-supported. Last week’s US inflation data for March 2026 showed Core CPI rising by a stubborn 0.4%, forcing markets to price out the two rate cuts previously expected for this year. This has pushed the US 10-year Treasury yield back above 4.5%, attracting capital and boosting the greenback.
We remember the sharp swings in energy prices throughout 2025, and this current environment feels similarly unstable. Given the opposing pressures on USD/CAD, traders should consider buying volatility through options strategies like straddles. This allows for profiting from a significant move in either direction, as a breakout seems more likely than a prolonged period of range-bound trading.
