Will War Talk Lift the Dollar? Charts Say “Not So Fast”

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

US Dollar        1.3590-1.3830

Euro                 1.5660-1.5910

Sterling            1.8360-1.8610

WTI Oil (opening level) $73.78

The CAD/USD is opening at 1.3705 ( 0.7296 ) 

The USD/CAD pair holds steady near 1.3700

However, fears of US involvement in Middle East conflict could spark demand for the USD, a safe-haven currency. The White House said Trump will make a decision within the next two weeks about whether to join Israel in the war.

Technically, the bearish outlook of USD/CAD remains in play as the pair remains capped below the key 100-day Exponential Moving Average (EMA) on the daily chart. Furthermore, the downward momentum is supported by the 14-day Relative Strength Index (RSI), which is located below the midline around 45.0, suggesting that the path of least resistance is to the downside. 

The initial support level for the pair is seen at 1.3660, the low of June 6. Any follow-through selling below this level could see a drop to 1.3568, the lower limit of the Bollinger Band. A decisive break below the mentioned level could expose 1.3430, the low of September 24, 2024. 

On the bright side, the first upside barrier for USD/CAD emerges at 1.3746, the high of June 19. Sustained trading above this level could pave the way to 1.3830, the upper boundary of the Bollinger Band. Extended gains could see the next hurdle at 1.3945, the 100-day EMA. 

Headlines

·    Iran held direct talks with the US amid the Israel conflict, as reported by Reuters. Iran's Foreign Minister spoke with Trump's envoy, stating talks would resume if Israel stopped attacks. Trump demanded Iran end uranium enrichment. A diplomat mentioned Iran might be flexible on the nuclear issue if the US pressured Israel to stop the war.

·    Japan’s consumer prices excluding fresh food accelerated for a third month to 3.7% YoY in May to a fresh two-year high. The report came ahead of a summer election where rising cost of living will be a key topic while the Bank of Japan ponders what to do with borrowing costs at 0.5%, the lowest among its global peers.

·    SNB cut its policy rate by 25 bps to 0% in June 2025, due to easing inflation and a weak global outlook. Swiss consumer prices fell by 0.1% in May. The SNB forecasts inflation at 0.2% for 2025, 0.5% for 2026, and 0.7% for 2027. Swiss GDP grew in Q1 2025, aided by early US exports, but growth is expected to slow, with forecasts of 1% to 1.5% for 2025 and 2026. More below in Currencies on the SNB decision.

·    Norges Bank cut its key rate by 25 bps to 4.25% in June 2025, defying expectations of a hold. The bank indicated more cuts could follow if the economy aligns with expectations, but uncertainty prevents committing to a specific path.

·    BoE voted 6-3 to keep the Bank Rate at 4.25% in June, amid global uncertainty and inflation. Three members wanted a 0.25% cut. Inflation is expected to stay steady this year and ease next year, but risks include rising energy prices and potential US tariffs. UK GDP growth is weak, and the labour market is loosening.

Key Points

• Equities: Geopolitical risks, cautious Fed, Europe slides, UK lags, Asia mixed

·    Volatility: VIX elevated, triple witching, short-term swings likely

·    Digital assets: Bitcoin steady, strong ETF inflows, low volatility

·    Fixed Income: JGB market calm overnight after hot core May Japan CPI release

·    Currencies: USD pushed back lower after post-FOMC bounce, JPY remains weak.

·    Commodities: Investment metals succumb to profit taking, Crude fluctuations continue