The US dollar picked up support against the Canadian dollar on Tuesday as risk sentiment remained somewhat mixed on the US-Iran situation.
Gold fluctuated, heading for a close higher, while Brent crude was paring gains for the second day with the opening of the New York session.
This signals that Iran fears remain somewhat elevated as markets are still awaiting Iran’s response to the US airstrike killing Qassem Soleimani.
Rising tensions and a possible escalation of conflicts in the Middle East could push the price of Brent crude higher, which would also be beneficial for the Canadian dollar.
Another concern for markets includes the Strait of Hormuz, which ships a large portion of the global oil supply from the Gulf countries. Conflict in the region could hinder the flow of oil through that waterway and push its price significantly higher.
Regarding market reports, both the US and Canada published their trade balances for November. The Canadian trade balance came in at -$1.1 billion, missing market expectations of a $0.8 billion fall and weighing on the currency with the New York open.
In the US, the trade balance in November recorded a deficit of $43.1 billion, beating forecasts that were set at $44.5 billion.
Another highlight includes the ISM non-manufacturing PMI which is scheduled for release at 3:00 p.m. London time. Market expectations are set at 54.5, up from last month’s reading of 53.9.
From a technical standpoint, the USD/CAD pair found support right at the lower line of a falling channel, printing a strong bullish candle in today’s trade.
While the recent down-turn looks overstretched, US-Iran tensions will likely dominate the performance of the pair in the days ahead. So far, the December 31 low of 1.2951 remains a solid support level for the pair.
USD/CAD LONG (Buy)
ENTER AT: 1.298