The US dollar retreated briefly against the Canadian dollar near 1.3900 during Monday's Asian trading session, ending a four-day winning streak. The Canadian dollar was supported by its commodity currency characteristics, particularly by two consecutive days of rising oil prices.

WTI crude oil prices rose slightly, currently trading around $59.40 per barrel. This was supported by economic data from major Asian countries boosting global oil demand expectations; however, upside potential for oil prices remains limited. Easing tensions between the US and Iran have reduced the risk of supply disruptions.

Last week, US President Trump indicated that military action against Iran might be delayed. However, Trump warned that if the decision to resume is made, he could still take strong measures, and geopolitical risks are still partly priced into oil prices.

Regarding the US dollar, recent strong US labor market data has postponed expectations of a Federal Reserve rate cut until June. Fed officials stated that there is no need for further easing until inflation consistently returns to the 2% target, which has provided some support for the dollar in the short term.

Overall, USD/CAD is under short-term pressure from the support of oil prices for the Canadian dollar, but the fundamentals of the US dollar are still providing upward momentum, and the exchange rate is expected to fluctuate within a range with a slight downward bias in the short term.

From a daily chart perspective, USD/CAD has retreated near 1.3900, indicating that its short-term upward trend has encountered resistance. The 5-day moving average has slightly turned downwards, while the 10-day moving average at 1.3880 provides support, and the 20-day moving average at 1.3850 offers medium-term support.

The MACD histogram is shrinking and approaching the zero line, indicating weakening short-term momentum; the RSI has fallen back to around 55, showing short-term weakness but not yet entering oversold territory. Resistance levels are at 1.3925 and 1.3950; a break above these levels could lead to a test of 1.3980.

Support levels are at 1.3880 and 1.3850; a break below 1.3850 could trigger further pullback. The overall daily chart structure indicates a short-term bias towards consolidation and weakness; attention should be paid to oil prices and the movement of the US dollar.


Editor's Note:

The short-term pullback in USD/CAD was mainly due to support for the Canadian dollar from stronger oil prices, but the US dollar's fundamentals continued to provide support, resulting in a tug-of-war. Easing tensions between the US and Iran and limited upside for oil prices made it difficult for the exchange rate to break through recent highs.

Meanwhile, strong US labor market data delayed expectations of interest rate cuts, supporting the US dollar's medium-term trend. Attention should be paid to the support and resistance levels in the 1.3880-1.3925 range, while the short-term bias is slightly weak and volatile. If oil prices continue to rise and the US dollar weakens, it could push the Canadian dollar further stronger in the short term; conversely, if the US dollar rebounds, USD/CAD may return to its upward trend.