Geopolitical Fears Grip Markets: USD/CAD Holds, Oil & Gold Jump on Iran Threats

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3510-1.3750

Euro                 1.5680-1.5920

Sterling            1.8420-1.8650

WTI Oil (opening level) $66.89

The CAD/USD is opening at 1.3636 ( 0.7333 )

The USD/CAD pair may find initial support near the eight-month low at 1.3634, which was recorded on June 5. A break below this level could weaken the price momentum and put downward pressure on the pair to navigate the region around the lower boundary of the descending channel around 1.3450, followed by 1.3419, the lowest since February 2024.

On the upside, the USD/CAD pair may encounter primary resistance at the nine-day EMA of 1.3695, followed by the descending channel’s upper boundary around 1.3720. A break above this crucial resistance zone could weaken the bearish bias and lead the pair to approach the 50-day EMA at 1.3874, followed by the two-month high of 1.4016, which was reached on May 13.

Headlines

·    Trump said he will set unilateral tariffs rates within two weeks. Earlier deal with China left tariffs at 55%, 30% from reciprocal tariffs, and 25% from fentanyl.

·    US May CPI rose to 2.4% YoY, below the expected 2.5%. Price increases were notable in food (2.9%), transportation services (2.8%), used cars and trucks (1.8%), and new vehicles (0.4%). Core CPI increased 2.8%, slightly below the 2.9% estimate. The month-on-month increases for both releases were at 0.1% vs. 0.2% and 0.3% expected for the headline, core readings, respectively.

·    US and China reached a preliminary deal on rare earths supply and eased student visa restrictions, but unclear tariffs and export controls dampened investor optimism. President Trump said the deal was “done,” pending approval from him and President Xi, with a decision expected soon.

·    US recorded a $316 billion budget deficit in May, down 9% year-on-year, driven by record customs receipts of $23 billion from new tariffs. Gross customs receipts rose from $6 billion in May 2024 due to increased tariffs.

·    Iran threatened to strike American bases in the Middle East if the nuclear talks collapse and the country is attacked. The US ordered some staff to depart its embassy in Baghdad due to heightened security risks, while the UK navy issued a rare warning to mariners that higher tensions could affect shipping, including the Strait of Hormuz the world’s most critical oil transit chokepoint that sees more than 20 million barrels of crude pass through daily.

·    Bloomberg reports that the US defense department is reviewing the Aukus defense pact to develop nuclear-powered submarines with Australia and the UK, a deal that was signed in 2021. Trump administration officials are questioning whether it aligns with the US’ “America First” agenda.

Key Points

·    Equities: US inflation cools; trade deal uncertainty; Europe drops; UK outperforms

·    Volatility: VIX up, but calm persists; light hedging ahead of Fed; macro-driven moves

·    Digital assets: Bitcoin steady; IBIT, ETHA see strong ETF inflows; sentiment bullish

·    Fixed Income: Treasuries rally on soft US CPI

·    Currencies: USD falls, JPY firms on soft US CPI that boosts bonds

·    Commodities: Tehran threat lifts crude oil and gold; Ags await U.S. crop report

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