The U.S. dollar lost more ground against the Canadian dollar on Friday, with USD/CAD slipping for a third straight session to trade near the 1.3770 mark. The commodity-linked loonie has been drawing strength from the latest surge in crude oil prices, which have climbed as tensions between Washington and Tehran continue to escalate. The two sides remain locked in a standoff over control of the Strait of Hormuz, and the U.S. is now preparing to roll out what President Trump has labeled Economic D-Day, a sweeping package of measures aimed at cutting Iran off from global commercial and financial networks. The official details are expected Monday, with the proposed actions targeting banks, businesses, ship registries, cash transfers, and smuggling operations in an effort to force Tehran to negotiate on its nuclear program, regional activities, and access to the key waterway. Treasury Secretary Scott Bessent told CNBC that dismantling Iran's economic lifeline could remove the need for large-scale military intervention, arguing that maximum economic pressure makes a major military escalation far less likely. Scotiabank strategists noted the Canadian dollar is benefiting from a mix of broad dollar weakness and signs of improvement in U.S.-Canada trade, with the loonie trailing only the New Zealand dollar among major currencies with a 0.3 percent gain on the day. They highlighted that while intraday moves remain relatively contained, the Canadian dollar's tone is clearly firm during this session. The dollar's downside could be limited, however, as Treasury yields have rebounded despite the Treasury's attempts to cap borrowing costs through a long-term bond buyback program. Bessent also indicated that accelerated debt repurchases could exceed $4 billion per phase, with a broader fiscal plan still being developed. Scotiabank added that the greenback has fallen to its lowest level since mid-June, with equity markets mixed, crude prices strengthening, and bond markets slightly weaker, while U.S. debt underperforms and the yield curve steepens once again.
USD/CAD is currently trading around the 1.3765 area, with the moving average setup across multiple timeframes painting a firmly bearish picture that supports the pair's recent slide. On the hourly chart, the 50-period Simple Moving Average sits at 1.3810, resting above the current price and acting as the nearest dynamic resistance barrier, while the 200-period Simple Moving Average is positioned at 1.3880, providing a higher structural ceiling that has been decisively broken to the downside. The 50 SMA holding below the 200 SMA keeps a bearish crossover in place on the hourly timeframe, signaling that sellers remain in control. Zooming out to the four-hour chart, the 50-period Simple Moving Average rests at 1.3880, matching the hourly 200 SMA to form a reinforced resistance zone at this level, while the 200-period Simple Moving Average on this higher timeframe sits much higher at 1.4030, marking the ultimate medium-term ceiling. The overlap of the four-hour 50 SMA with the hourly 200 SMA at 1.3880 creates a solid supply area that should cap any recovery attempt. Looking at the horizontal levels that exist separately from the moving averages, the first resistance barrier sits at 1.3810, matching the hourly 50 SMA, followed by the 1.3840 area and the 1.3880 convergence zone where the hourly 200 SMA and four-hour 50 SMA meet. Above that, the next hurdles are at 1.3920 and 1.3950, with the 1.4030 four-hour 200 SMA acting as the ultimate upside target. On the support side, the first floor is at the 1.3765 current trading zone, followed by the 1.3730 level and the 1.3700 psychological mark. Below that, the next cushions are at 1.3670 and 1.3650, with the 1.3600 area serving as the final major base whose break would signal a further acceleration to the downside. For now, the pair remains under pressure, and a daily close below 1.3765 would likely open the door toward 1.3700 and lower, while any recovery attempt will need to clear the 1.3810 level before regaining momentum. The combination of softer dollar sentiment and firmer oil prices continues to favor the loonie, though traders should watch U.S. yield movements closely, as any sharp rebound in yields could slow the pair's descent.
