• USD/CAD draws some support from a modest USD recovery, though bulls seem hesitant.
• Rebounding Crude Oil prices underpin the Loonie and act as a headwind for spot prices.
• The technical setup also warrants caution before positioning for any meaningful recovery.

The USD/CAD pair struggles to capitalize on an intraday uptick and trades around the 1.3770-1.3775 region, up less than 0.05% for the day heading into the European session on Wednesday. Spot prices, for now, seem to have stalled a modest recovery from the 1.3730 area, or a three-week low, touched the previous day, though a combination of diverging forces warrants some caution before placing aggressive directional bets.

Despite the latest optimism over diplomatic efforts to resume US-Iran peace talks, the Strait of Hormuz remains a major point of contention amid the US Navy blockade of Iranian ports. This could jeopardise the already fragile ceasefire, which benefits the US Dollar's (USD) safe-haven status and acts as a tailwind for the USD/CAD pair. That said, an intraday bounce in Crude Oil prices from a three-week low underpins the commodity-linked Loonie and caps the upside for the currency pair.

From a technical perspective, spot prices showed some resilience below the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 50% Fibonacci retracement level of the March upswing. The lack of any meaningful buying interest, however, warrants some caution before confirming that the USD/CAD pair's recent sharp pullback from the 1.3965 region, or a nearly four-month high set on March 31, has run its course or positioning for any meaningful appreciating move.

Meanwhile, spot prices remain capped beneath the 38.2% Fibo. retracement hurdle at 1.3798, which is followed by a stronger barrier at the 23.6% retracement near 1.3862, keeping the near-term tone neutral to slightly bearish. Furthermore, the Relative Strength Index around 37 and a slightly negative Moving Average Convergence Divergence (MACD) reading hint that recovery attempts lack strong bullish momentum, suggesting that selling could re-emerge if the bounce extends.

On the downside, initial support is provided by the 200-period SMA on the 4-hour chart at 1.3759, ahead of the 50.0% Fibo. level at 1.3746. A convincing break below these levels would expose the 61.8% Fibo. retracement at 1.3694, with deeper pullbacks potentially targeting the 78.6% level at 1.3619 and the prior swing low zone around 1.3525.

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

USD/CAD 4-hour chart