The Canadian dollar held near recent highs as oil prices gained, keeping the USD/CAD forecast bearish. Oil rose with the possibility of disruptions in the supply chain due to the turmoil in the Middle East. Although Israel has minimal crude oil production, there are concerns in the market that the conflict could escalate and disrupt oil supplies in the Middle East. Moreover, it would exacerbate the expected supply deficit for the rest of the year. 

Canada, a significant producer of commodities, including oil, tends to be sensitive to changes in investor sentiment.

Meanwhile, the dollar was weak on Wednesday as investors digested dovish comments from Federal Reserve officials. Recently, several Fed officials have indicated that the US central bank may not need to pursue aggressive tightening of monetary policy as initially thought. On Tuesday, Atlanta Fed Bank President Raphael Bostic asserted that there was no need to increase borrowing costs further.

At the same time, traders eagerly awaited the release of the Fed’s policy meeting minutes later to gain further insights into its stance on interest rates.

On Tuesday, the Canadian dollar showed little movement against the US dollar, holding close to its highest level in over a week. Dovish comments from Federal Reserve policymakers boosted investor sentiment. Moreover, stronger-than-expected Canadian employment data kept supporting the Canadian dollar.

USD/CAD key events today

Canada will not release any major reports today. However, reports from the US will include:

• The FOMC meeting minutes.
• The producer price index report.

USD/CAD technical forecast: Bears close in on the 1.3550 support barrier.

USD/CAD 4-hour chart

The USD/CAD pair is approaching the 1.3550 support level, the first barrier after bears took control. Therefore, this level will be a big test for the new bearish move. Bears took the lead when the price broke below the 30-SMA and the 1.3701 key level. At the same time, the RSI signaled a shift in sentiment when it dipped below 50. 

However, bears must pass more tests to confirm the new direction. First, the price needs to respect the 30-SMA as resistance. Then, bears need to break below the 1.3550 support to make a lower low. Bulls will return if bears fail to pass these tests.

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