USD/CAD Market Update

USD/CAD Surges to 1.3741 – Tuesday, March 24, 2026

Current Level: Mid-1.37s (24hr range 1.3726–1.3762)

USD/CAD is trading near 1.3741 on Tuesday morning, gaining 66 pips from the previous session as the pair extends its move higher following last week's technical breakout above 1.3728. The advance comes as geopolitical tensions in the Middle East escalate further, with reports that Saudi Arabia and the United Arab Emirates are considering military action against Iran, keeping oil prices elevated and supporting safe-haven demand for the U.S. dollar. The Canadian dollar faces pressure despite elevated crude prices as markets assess the Bank of Canada's commitment to looking through the current energy shock.

Market Overview:

Risk appetite remains subdued this morning as traders assess escalating geopolitical risks in the Middle East. Equity markets are trading lower across major indices as investors weigh the implications of potential military action by Saudi Arabia and the UAE against Iran. The U.S. dollar maintains a firm tone across the G10 basket as safe-haven flows persist, supported by the ongoing conflict and its impact on global energy supply. Global bond yields remain elevated as markets reassess inflation trajectories following the sustained surge in energy prices. Oil prices hold near current levels as the conflict continues to disrupt supply flows through the Strait of Hormuz, with Iran showing no signs of backing down on its transit fee demands or reopening the waterway to normal traffic.

Middle East Tensions Escalate with Regional Powers:

Geopolitical tensions in the Middle East reached a new level of concern this morning as reports emerged that Saudi Arabia and the United Arab Emirates are considering military action against Iran. The potential for regional powers to join the conflict represents a significant escalation that could broaden, deepen, and extend the military crisis and its associated economic destruction. The Wall Street Journal reported that these nations may soon be prepared to enter the conflict, adding fresh uncertainty to an already volatile situation.

Iran continues to demonstrate its leverage over global energy markets through its control of the Strait of Hormuz. The Iranian regime has begun charging transit fees on commercial vessels passing through the Strait, with payments reaching as much as $2 million per voyage. This toll system shows Iran's influence over the waterway and has added a fresh layer of friction to the world's most important energy shipping lane. The Iranian deputy speaker of Parliament stated that Iran will neither return the Strait of Hormuz to its previous state nor negotiate with parties it views as lacking honor and humanity.

Market Doubts De-Escalation Prospects:

Risk assets fell this morning as traders doubt de-escalation in Iran. Yesterday's reports of potential progress toward a ceasefire are being questioned after the speaker of the Iranian Parliament suggested the de-escalation story was fake news. Market odds of a ceasefire by the end of March sit at just 14 percent, reflecting deep skepticism about near-term resolution prospects. The lack of credible progress toward ending the conflict keeps the risk premium elevated across asset classes.

The conflict continues to dominate market direction, with headlines rather than economic data driving currency movements. Today's economic data calendar is sparse, leaving traders focused on any developments in U.S.-Iran tensions. The situation has supported oil prices as continued pressure on the Strait of Hormuz constrains supply flows. Iran's refusal to negotiate and its implementation of transit fees signal that the conflict may persist longer than markets initially anticipated.

Private Credit Concerns Add to Market Anxiety:

Private credit angst continues to weigh on markets after Ares and Apollo limited withdrawals from their major private credit funds. Ares is allowing only 5 percent of shares to be redeemed after requests reached 11.6 percent, while Apollo investors are receiving only 45 percent of the amount they requested to redeem. These developments are raising questions about liquidity in the private lending space, with some analysts drawing comparisons to subprime issues from previous financial crises. The so-called cockroaches are starting to show up in the private lending space, adding another layer of concern for investors already dealing with geopolitical uncertainty.

Central Banks Maintain Cautious Stance:

Central banks have been relatively calm in response to the energy shock, especially the Bank of Canada, though market pricing has shifted sharply toward rate hikes. Last week, the BoC emphasized the weaker economic starting point, with excess slack and inflation trending toward 2 percent, as allowing them to look through the current situation for now. The Bank stressed it needs time to assess the situation before making policy changes. This patient approach contrasts with market expectations, which have priced in approximately 34 basis points of hikes by year end.

The Federal Reserve has similarly maintained a cautious stance, indicating it will not cut rates again until inflation resumes cooling. Markets have almost fully priced out the single remaining cut expected by year end, which had already been reduced from two cuts before the conflict began. The Fed's updated Summary of Economic Projections showed a slightly faster growth and inflation outlook, with core PCE inflation for 2026 revised up to 2.7 percent from 2.5 percent. The market is now pricing in only 58 percent probability of a rate cut by the Fed this year.

Technical Breakout Shifts Focus Higher:

Last week's close above 1.3728 was technically significant, ending the downtrend from late November and resolving a consolidation phase to the upside. The breakout nullified a potential triple top formation and shifted focus to higher resistance levels. However, immediate upside momentum is needed to sustain the move, as the response has been somewhat muted so far. The breakout shifts attention to 1.3856 as the next target, followed by strong resistance at 1.3932. RBC's one to three month target has been raised to 1.3900 following the breakout, though follow-through is needed to confirm this move.

Initial support now sits at the trendline off recent lows around 1.3686. A daily close below this level would neutralize the bullish setup. A break below 1.3584 would end the corrective rally and reassert the broader downtrend. For now, USD/CAD remains anchored in the mid-1.37 range, with gains requiring follow-through momentum to extend toward the upside targets.

Precious Metals Under Pressure:

Precious metals remain under significant pressure, with gold and silver resuming their historic decline. Silver is down approximately 50 percent from its all-time high set in January, while gold is down approximately 23 percent from its peak. Both metals have fallen through the 50-day and 100-day support levels and are eyeing the make-or-break area at the 200-day moving average. The decline in precious metals comes despite ongoing geopolitical tensions, suggesting that other factors such as rising real yields and dollar strength are dominating the traditional safe-haven bid for gold.

European Activity Data Disappoints:

The euro is trading with a defensive bias after private sector activity fell to a ten-month low, suggesting that hopes for a stimulus-led rebound are fading as businesses grapple with a rapidly unfolding energy shock. The composite purchasing manager index fell to 50.5 points in March after business costs climbed at the fastest rate for over three years amid the surge in energy prices and choking of supply chains resulting from the war in the Middle East. The pound is performing even worse, with the composite purchasing manager index dropping to a six-month low of 51.0, barely above the threshold separating expansion from contraction, while manufacturing input costs surged at the fastest monthly pace since 1992.

Canadian Data/Outlook:

There is no top-tier Canadian data scheduled for release today. The economic calendar remains light ahead of key events later this week. The Bank of Canada is expected to hold its overnight rate at 2.25 percent at the upcoming April 29 meeting. RBC forecasts the BoC overnight rate to remain at 2.25 percent through all of 2026. The central bank is comfortable at the bottom of the neutral range, though policymakers must weigh rising energy costs against domestic economic struggles. The Bank has emphasized that it will look through the immediate impact of the war on inflation, but if energy prices stay high, the Bank will not let their effects broaden and become persistent. With USMCA negotiations approaching, the Canadian dollar remains vulnerable to weakness should tensions with the United States escalate, though elevated oil prices have provided offsetting support in recent sessions.

Fed Watch:

The Federal Reserve is expected to hold rates at 3.75 percent at its next policy meeting on April 29. Markets have completely priced out any rate cuts for 2026 as the energy shock from the Iran conflict adds a dimension to the Fed's inflation challenge that may force the central bank to remain restrictive even as growth weakens. The market is now pricing in only 58 percent probability of a rate cut by the Fed this year, down from a full rate cut that was priced in before last week's FOMC meeting. RBC expects the Fed Funds rate will remain at the current 3.50 percent to 3.75 percent range through 2026. The firm hawkish lean may have been overdone, as the U.S. continues to grapple with a soft labor market while activity and consumption are likely to dampen as inflationary pressures from the conflict build. The outcome may be a temporary high-inflation phase met by a softening macro backdrop, ultimately warranting cuts later in the year, a combination that would add renewed pressure on the greenback.

Technical Picture:

Resistance: 1.3856 (initial upside target following last week's breakout), 1.3932 (early January double top, strong resistance level)
Support: 1.3728 (now acts as initial support after last week's breakout), 1.3686 (trendline off recent lows), 1.3671 (secondary support), 1.3581 (deeper support level)
Outlook: Last week's close above 1.3728 ended the November downtrend and resolved consolidation higher, shifting focus to 1.3856 then 1.3932. For gains to extend, the pair needs follow-through momentum. Key resistance sits at 1.3856 and 1.3932, with support at 1.3671 and 1.3581. The one to three month target is now 1.3900 following the breakout. A daily close below 1.3686 would neutralize the bullish setup, while a break below 1.3584 would end the corrective rally and reassert the broader downtrend.

Week Ahead:

The week ahead features a light data calendar today, with attention focused on flash PMI releases across major economies. European PMI data released this morning showed weakness, with the eurozone composite falling to 50.5 and the UK composite dropping to 51.0, both reflecting the impact of rising energy costs on business activity. U.S. flash PMI data will be released later today. The key event for Canadian markets remains the April 29 Bank of Canada meeting, where the central bank is expected to hold rates at 2.25 percent while ass

Market Mood:

RSI Scale: <30 Oversold | 30-40 Risk-Off | 40-60 Neutral | 60-70 Risk-On | >70 Overbought

This commentary is provided for informational purposes only and should not be construed as investment, legal, or tax advice. Past performance is not indicative of future results. Please consult with qualified professionals before making any financial decisions. Vantry Capital Inc.