USD/CAD Price Forecast: Seeks trigger for fresh leg of rally above 1.3870

The USD/CAD pair trades subduedly at around 1.3836 during the European trading session on Tuesday. The Loonie pair ticks lower as the US Dollar (USD) faces selling pressure despite uncertainty regarding whether the United States (US) and Iran will reach a deal soon.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 99.08.

The US-Iran deal uncertainty has increased, following headlines from Iran's Tasnim agency on Monday that Tehran’s negotiating team has stopped exchanging messages with the US through mediators in response to an escalation of war crimes in Lebanon.

The US Dollar outperformed in the last few months as the Middle East crisis boosted oil prices, which prompted US inflation and forced traders to price out dovish Federal Reserve (Fed) bets. The US-Iran tensions also improved the appeal of safe-haven assets.

On the domestic front, investors await the US JOLTS Job Openings data for April, which will be published at 14:00 GMT.

USD/CAD technical analysis

USD/CAD trades almost flat at around 1.3838 at press time. The pair holds a bullish near-term bias as price trades above the 20-day exponential moving average (EMA) at 1.3771. The short-term trend remains constructive while the pair defends this dynamic support, with the Relative Strength Index (RSI) around 63 suggesting firm but not yet overbought upside momentum.

On the downside, immediate support is located at the 20-day EMA near 1.3771, with a break below this level likely to signal a deeper corrective move towards the May 20 low at 1.3731. Looking up, the pair would resume its advance and revisit the March 31 high at 1.3967 if it manages to break above the May 28 high at 1.3870.