Canadian Dollar Poised for Fourth Consecutive Weekly Gain on Weaker USD and Higher Oil Prices

USD/CAD remained under pressure on Friday, trading at 1.37482, with the Canadian dollar on track for a fourth consecutive weekly gain, driven by a softer US dollar and stronger crude oil prices.

**USD Under Pressure Amid Multiple Factors**

Recent US economic data has continued to weaken, including a soft Producer Price Index (PPI), a Consumer Price Index (CPI) showing cooling inflation, and the previously released non-farm payrolls report, leading markets to further trim bets on an imminent Federal Reserve rate hike, keeping the US dollar broadly weak. According to reports, Scotiabank strategists noted that the Canadian dollar is benefiting from the dual tailwinds of a broadly weaker US dollar and progress in US-Canada trade relations, jointly supporting its advance. However, with markets still pricing in at least one Fed rate hike this year, coupled with ongoing geopolitical uncertainties, the downside for the US dollar is expected to be somewhat limited.

**Geopolitical Risks Lift Oil Prices, Adding Support to CAD**

Escalating US-Iran tensions around the Strait of Hormuz continue, with US Treasury Secretary Bessent stating that severe economic measures, including port blockades, would be imposed on Iran. Meanwhile, Yemen's Houthi forces have intensified attacks in the Red Sea and the Bab el-Mandeb Strait, fueling supply concerns and pushing crude prices higher. As a commodity-exporting currency, the Canadian dollar benefits directly from rising oil prices, adding further downward pressure on USD/CAD.

**Technical Outlook Turns Bearish, Key Support Levels in Focus**

On the technical front, USD/CAD has broken below the 100-day simple moving average and the 50.0% Fibonacci retracement of the May-to-June rally, with the daily chart turning bearish. According to analysis, key support levels to watch on the downside are the 61.8% Fibonacci retracement at 1.3814 (already breached), the 78.6% retracement at 1.3695, and the 1.3544 level further below. Going forward, US retail sales data, the preliminary University of Michigan consumer sentiment index, and remarks from Federal Reserve officials will be important variables influencing the direction of USD/CAD.