Today, the USD/CAD currency pair climbed above the 1.3787 level for the first time since late January.

→ Demand for the US dollar is being supported by concerns over escalating tensions in the Middle East. Market participants are favouring the USD as a safe-haven asset.

→ The Canadian dollar is under pressure due to domestic economic concerns. According to media reports, recent data point to weak GDP growth and a soft labour market. This increases the likelihood that the Bank of Canada will cut interest rates, while the Federal Reserve is expected to keep them unchanged.

Technical Analysis of USD/CAD

On 23 February, when the pair was trading around the 1.3700 level, we:

→ highlighted the ongoing long-term descending channel and the key support at 1.3500;
→ noted similarities with a rounding top pattern;
→ suggested a scenario in which bears might attempt to regain control and resume the longer-term downtrend.

Indeed, in the following sessions, USD/CAD showed signs of strong selling pressure, with the most pronounced move occurring on 9 March, when the pair dropped below 1.3530.

However, the onset of the Middle East conflict and other factors have significantly shifted market sentiment. The long-term descending channel has now been broken, suggesting that:

→ bulls have regained control of the market;
→ the pair may continue to develop within a newly formed ascending channel (shown in blue);
→ the 1.3700 level, which previously acted as resistance, may now serve as support going forward.

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