USD/CAD Nears 1.3700 as Geopolitical Tensions Boost Safe-Haven Demand

USD/CAD Strengthens in Asian Trading Session

The USD/CAD currency pair trades near 1.3690 in early Wednesday trading in Asia. Ongoing geopolitical tensions in the Middle East are fueling safe-haven demand for the US Dollar (USD), even as recent US economic data adds downside risks.

Israel-Iran Conflict Boosts Safe-Haven Demand

Tensions are escalating as Israel signals more aggressive actions against Iran, while the United States may increase its involvement in the conflict. These developments are prompting investors to seek stability in the Greenback, historically considered a safe-haven currency during geopolitical crises.

US President Joe Biden left the G7 summit early and reiterated the US stance on ending Iran’s nuclear ambitions, reinforcing the urgency of the situation and boosting risk aversion in global markets.

Weak US Retail Sales Increase Uncertainty Ahead of Fed Decision

Although the geopolitical narrative supports the USD, US economic data released Tuesday showed that Retail Sales fell 0.9% in May, compared to a downwardly revised 0.1% drop in April. This was worse than market expectations for a 0.7% decline.

The report raises concerns about consumer spending weakness, which could influence the Federal Reserve's interest rate decision expected later today.

Technical Outlook: USD/CAD Eyes Key Resistance at 1.3700

USD/CAD is approaching the 1.3700 psychological resistance level, which could act as a breakout point if geopolitical fears persist. On the downside, a dovish tone from the Fed or further negative economic data might limit USD gains.

Suggested Internal Links for Tredu.com

• How Geopolitical Events Affect Forex Markets
• Safe-Haven Currencies Explained
• USD/CAD Forecast and Analysis
• Federal Reserve Interest Rate Tracker