The US dollar continued its decline against the Canadian dollar in Asian trading on Friday, trading around 1.3770, marking its third consecutive day of losses. The Canadian dollar's recent relative strength has been driven by two main factors: firstly, rising oil prices due to escalating supply risks in the Middle East have improved external trading conditions for Canada, a major energy exporter; secondly, the overall weakening of the US dollar has further amplified downward pressure on the USD/CAD exchange rate. The crude oil market has recently re-priced in a higher supply risk premium. Significant disagreements remain between the US and Iran regarding shipping security in the Strait of Hormuz, raising market concerns about disruptions to key energy transport routes. Simultaneously, the US is pushing for further tightening of restrictions on the Iranian economy, affecting financial institutions, businesses, shipping, and capital transfers. Given the strong transmission effect of crude oil prices on the Canadian economy and the Canadian dollar exchange rate, rising oil prices typically improve market sentiment regarding the Canadian dollar's fundamentals. Currently, the market is particularly focused on further measures to be announced by the US. If these actions lead to greater restrictions on Iranian crude oil exports, and shipping risks persist, international oil prices may remain high, providing additional support for the Canadian dollar. Conversely, if regional tensions ease, crude oil prices may revert to some of their risk premium, and the USD/CAD exchange rate may regain upward momentum. In addition to energy factors, signs of improved trade relations between the US and Canada are also a significant factor supporting the Canadian dollar. The Canadian economy is closely linked to the US market, and any signals of improved trade relations could reduce market concerns about the outlook for Canadian exports. The Canadian dollar has recently outperformed most major currencies, indicating an improving market sentiment towards it. TD Bank strategists point out that the recent rise in the Canadian dollar has been driven by a general weakening of the US dollar and progress in US-Canada trade relations. Data shows that the Canadian dollar's daily increase was approximately 0.3%, a relatively strong performance among major currencies. This suggests that the current rise in the Canadian dollar is not solely driven by oil prices, but rather by the combined influence of commodity prices, the US dollar's performance, and regional trade expectations. The US dollar, on the other hand, has been relatively weak. The US dollar index has fallen to its lowest level since mid-June, and major currencies have shown mixed performance. Meanwhile, the US Treasury market has been relatively weak, with the yield curve steepening again, and rising long-term Treasury yields providing some support for the US dollar. The US Treasury previously signaled an expansion of long-term Treasury repurchase programs, hoping to improve the long-term bond market and alleviate financing cost pressures. However, market performance shows that Treasury yields have continued to rise, indicating that investors' concerns about the US fiscal situation, bond supply, and future interest rate path have not subsided. If long-term Treasury yields continue to rise, the downside potential for the US dollar against the Canadian dollar may be significantly limited. From a macroeconomic perspective, the USD/CAD pair is currently in a phase of intertwined factors. Rising oil prices and a weakening US dollar are jointly pushing the exchange rate down, while rising US yields are providing converse support. For traders, whether the Canadian dollar can maintain its advantage largely depends on whether the rise in oil prices can continue and whether the US dollar continues to weaken. If Middle East supply risks persist and WTI crude oil prices rise further, Canada's energy export advantage may continue to strengthen, and the USD/CAD pair will face further downward pressure. At the same time, if US economic data weakens and leads to a reduction in market expectations for US interest rates, the US dollar may come under further pressure, thus accelerating the decline in the exchange rate. Conversely, if US economic data remains resilient and US Treasury yields continue to rise, the US dollar's interest rate advantage may be strengthened again. If oil prices fall simultaneously due to easing geopolitical tensions, the commodity price support previously received by the Canadian dollar may weaken, and the USD/CAD pair may experience a technical rebound. Therefore, the core focus of the short-term market remains on three major variables: oil prices, US yields, and the US dollar index. From a daily chart perspective, the USD/CAD pair has been declining recently, with the price center of gravity continuing to shift downwards, and the short-term trend has clearly shifted to a bearish bias. After the exchange rate fell to around 1.3770, the market needs to pay close attention to the short-term support around 1.3750. If this area cannot be held effectively, USD/CAD may further seek support around 1.3650. On the upside, the first resistance level to watch is around 1.3850, followed by 1.3900 and the 1.3950 area. As long as the exchange rate continues to trade below 1.3900, the overall rebound is more of a technical correction than a trend reversal. Currently, the main technical feature of USD/CAD is that the downtrend remains intact, but it is approaching a key support area in the short term. From the 4-hour chart, the exchange rate maintains a relatively clear downward channel, and the short-term rebound strength is limited. If the price rebound fails to regain 1.3850, the bears may still attempt to break through 1.3750; once this level is effectively broken, further downside potential may open up. Conversely, if oil prices retreat from their highs while the US dollar receives support from rising US Treasury yields, and the USD/CAD pair breaks through 1.3850 again, it may correct towards 1.3900 or even 1.3950 in the short term. Currently, the 4-hour chart still favors observing bearish pressure on rallies, but a potential technical rebound near key support levels should not be ignored. Editor's Summary: The USD/CAD pair weakened for the third consecutive trading day, reflecting the combined effect of rising oil prices, a generally weak US dollar, and improved US-Canada trade relations strengthening the Canadian dollar. In the short term, oil prices remain a key variable influencing the exchange rate, while rising US long-term Treasury yields may act as a major buffer during the USD/CAD decline. If oil prices continue to rise and the US dollar remains weak, the exchange rate may further test 1.3750 or even lower; if US Treasury yields continue to rise and drive a US dollar rebound, the USD/CAD pair may experience a technical correction. The market will need to closely monitor energy prices, US economic data, and changes in US Treasury yields going forward.