• USD/CAD refreshes two-month high near 1.3900 as the US Dollar gains amid the Middle East war.
• Investors worry that Middle East conflicts could escalate further if the US attempts a ground invasion of Iran.
• The US Pentagon is considering sending 10,000 additional troops to Iran.

The USD/CAD pair posts a fresh two-month high at 1.3900 in the Asian trading session on Monday. The Loonie pair extends its five-day-long advance as the US Dollar (USD) trades firmly amid strong demand for safe-haven assets.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades almost flat, slightly above 100.00. Still, the DXY is close to its two-week high of 100.35.

Investors have shifted to the safe-haven fleet as conflicts in the Middle East, which involve the United States (US), Israel, and Iran, are expected to escalate further, following reports from the Wall Street Journal (WSJ), which claims that the US Pentagon is planning to send 10,000 additional troops to Iran for a ground invasion.

In response, Iran’s Brigadier General Ebrahim Zolfaqari has issued a stark warning on the Iranian state TV, saying that “US troops will be good food for sharks of the Persian Gulf”.

Meanwhile, higher oil prices are expected to limit the downside in the Canadian Dollar (CAD). Given that Canada is the largest exporter of oil to the US, rising oil prices are favorable for the Loonie.

USD/CAD technical analysis

USD/CAD trades higher at around 1.3900 as of writing. The near-term bias is bullish as price extends above the rising 20-day Exponential Moving Average (EMA), confirming a progression of higher closes from the 1.36 area.

The 14-day Relative Strength Index (RSI) jumps above 70.00, signaling a strong upside momentum, though it also warns that the recent advance is stretched after the sharp move from mid-month lows.

Initial support emerges at 1.3750, where the recent breakout level aligns with the 20-day EMA, followed by 1.3700 as a deeper pullback area. A sustained hold above these supports keeps focus on immediate resistance at 1.3895, with a break opening the way toward an over three-month high of 1.3930 zone next. Only a daily close back below 1.3760 would weaken the bullish structure and shift attention toward the 1.3700 region.

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