USD/CAD extends its winning streak for the third trading day on Thursday, rising slightly above 1.3700.
The possibility of the US attacking Iran has escalated Middle East tensions.
BoC Macklem is hopeful that the US will revoke tariffs once both nations strike a trade deal.
The USD/CAD pair extends its two-day recovery move to near 1.3710 during Asian trading hours on Thursday. The Loonie pair attracts bids as the US Dollar (USD) gains further, while Middle East tensions have escalated amid the possibility of the United States (US) striking Iran, Bloomberg reported.
The demand for safe-haven assets, such as the US Dollar, increases amid heightening geopolitical tensions. At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, moves higher to near 99.10.
On the domestic front, the Fed left interest rates unchanged in the range of 4.25%-4.50% for the fourth consecutive policy meeting and warned of stagflation risks due to the imposition of the trade policy by US President Donald Trump.
Meanwhile, trade tensions between the US and Canada appear to be improving as both agreed to reach a bilateral agreement within 30 days during the G7 Summit.
On Wednesday, Bank of Canada Governor Tiff Macklem warned of upside inflation risks if tariffs imposed by the US remain in place. However, he was hopeful that additional import duties would be removed if both nations struck a trade deal.
USD/CAD gains for three days in a row after posting a fresh eight-month low around 1.3540 on Monday. The Loonie pair recovers to near the 20-day Exponential Moving Average (EMA), which trades around 1.3715
The 14-day Relative Strength Index (RSI) returns above 40.00, suggesting that a bearish momentum has terminated for now. However, the bearish bias is intact.
The asset could slide towards the psychological level of 1.3500 and the September 25 low of 1.3420 if it breaks below Monday’s low of 1.3540.
On the contrary, a recovery move above the May 29 high of 1.3820 would open the door towards the May 21 high of 1.3920, followed by the My 15 high of 1.4000.
USD/CAD daily chart
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