USD\/CAD held near 1.3640 in Asian trading on Friday, after rising by more than 0.25% in the prior session. The Canadian Dollar was steady as oil prices eased.<\/p>\n
WTI slipped slightly after jumping more than 9% in the previous session, trading near $95.00 a barrel. US crude prices are up more than 40% since the war began.<\/p>\n
Oil prices may keep rising after the Strait of Hormuz was effectively closed during an escalating conflict involving the US, Israel and Iran. The International Energy Agency said the US-Israeli war on Iran is \u201ccreating the largest supply disruption in the history of the global oil market.\u201d<\/p>\n
Iran\u2019s new supreme leader, Mojtaba Khamenei, said the Strait of Hormuz closure should continue as a \u201ctool to pressure the enemy.\u201d He also warned that US military bases in the region should close immediately or face possible attacks.<\/p>\n
USD\/CAD declines may be limited if the US Dollar stays supported by expectations the Federal Reserve will leave rates unchanged next week. The benchmark federal funds rate is currently 3.50%\u20133.75%.<\/p>\n
Markets are also awaiting January\u2019s Personal Consumption Expenditures Price Index later on Friday. Attention is also on the first revision of fourth-quarter US GDP growth and March consumer confidence.<\/p>\n
The market is seeing a major tug-of-war on the USD\/CAD pair around the 1.3640 level. We have West Texas Intermediate crude holding near $95 a barrel, which should be driving the Canadian dollar much stronger. However, the flight to safety amid the Mideast conflict is keeping the US dollar in high demand.<\/p>\n
The closure of the Strait of Hormuz is the dominant factor, choking off roughly a fifth of the world’s daily oil supply, a disruption unseen in decades. Historically, events like the 1973 oil crisis caused prices to quadruple, and Iran\u2019s new leadership suggests this supply disruption is a long-term policy. This ongoing shock means we must prepare for oil prices to remain elevated or even climb higher.<\/p>\n
On the other side, the Federal Reserve’s firm stance on holding interest rates at 3.50-3.75% provides a strong floor for the greenback. The ongoing war is creating immense risk-off sentiment, pushing capital into US assets for safety. This counteracts the positive pressure on the loonie from oil prices.<\/p>\n
Given this uncertainty, we believe trading direction outright is extremely risky, and the focus must shift to volatility. Implied volatility on USD\/CAD options has surged, with currency volatility indexes showing a more than 30% jump since the conflict escalated last month. Strategies that benefit from large price swings, such as long straddles, are becoming more attractive for hedging against sharp, unpredictable moves.<\/p>\n
We are witnessing a breakdown in the typical inverse correlation between oil prices and the USD\/CAD pair. Looking back at data from 2025, that relationship was consistently strong, but the current safe-haven demand for the US dollar is overriding it. This means historical models based purely on oil prices are likely to be unreliable in the coming weeks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/CAD steadied near 1.3640 as oil eased; Hormuz closure lifts crude, Fed and PCE awaited.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-51375","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/51375","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=51375"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/51375\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=51375"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=51375"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=51375"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}