USD/CAD Trades Above 1.3650 as US-China Optimism and Oil Prices Battle for Direction

Immediate resistance: 1.3700
Support level: 1.3620
Oil influence zone: Sustained WTI above $64 could cap USD/CAD upside

USD/CAD Holds Above 1.3650 as US-China Trade Optimism Limits Oil-Driven CAD Gains

Stronger USD Counters Oil-Backed CAD Strength Ahead of US CPI

The USD/CAD pair is trading near 1.3680 during Wednesday's Asian session as the US Dollar (USD) remains supported by pre-CPI strength, while the Canadian Dollar (CAD) finds some footing on rising crude Oil prices. Traders brace for May's US Consumer Price Index (CPI) data, expected to show a 2.5% year-over-year increase—slightly higher than April’s 2.3%.

Oil Prices Climb, Offering Some Support to the CAD

West Texas Intermediate (WTI) crude oil continues to hover above $64.00 per barrel, driven by risk-on sentiment and improved global trade outlook. This is a positive signal for the Canadian Dollar, as Canada is the top oil exporter to the US, and higher crude prices typically support the CAD in forex markets.

US-China Trade Developments Fuel Optimism

Traders responded positively to the latest US-China trade talks in London. Reports indicate Washington may ease semiconductor restrictions and facilitate rare-earth shipments, improving supply chain fluidity. This bolsters global growth expectations and boosts sentiment for commodity-linked currencies like the CAD.

However, the USD remains firm due to growing confidence in a resilient US economy and a potentially hawkish inflation print, which could pressure the Federal Reserve to keep rates elevated.