The Canadian dollar, leading the currency board along with the USD, are lifted by the Middle East tensions. Along with war often comes currency volatility. One dynamic in FX markets is that they tend to be correlated with other assets; CAD and crude oil prices are often correlated, making this an area of significant attention for traders. The rising geopolitical risk, which often leads to fluctuations in oil supply and prices, directly affects the loonie's performance.
Oil volatility often correlates with Canadian dollar movement for FX traders, a historic correlation that tends to draw attention. Currency markets have had their fair share of catalysts for peculiar dynamics throughout the first two months of 2026.
For participants who enjoy volatility, this trend is already continuing in March. Over the weekend, the United States and Israel entered a military operation to topple the Islamic regime in Iran, about a month after revolts led to more than 30,000 victims of IRGC repression.
Despite the elimination of the ayatollah at the beginning of the operation, President Trump announced in an interview on Sunday that the tensions are expected to last four to five weeks.
US (WTI) Oil 4H chart, March 2, 2026. Source: TradingView. Past performance is not indicative of future results.
Moving away from the tragic realities of wartime, traders are tracking the conflict and its impact on risk aversion and oil flows, both of which heavily influence currency movements. Black gold actually gapped up to $75 at the weekly Globex open before easing to $72, still 7% above its Friday close.
USD/CAD is now battling between risk-off dynamics that are pushing the US dollar higher and the rise in oil that is underpinning CAD. The North American currency pair is now approaching the upper bound of its descending channel, with the 50-day moving average acting as resistance, offering a technical indicator to monitor throughout weekly trading.
USD/CAD daily chart, March 2, 2026. Source: TradingView. Past performance is not indicative of future results.
Resistance levels
● 1.37160 50-Day moving average
● 1.3750 Pivotal resistance
● 1.38 Handle resistance +/- 150 pips & 200-Day moving average
Support levels
● 1.3630 to 1.3660 Mid-range pivot
●1.3550 Main 2025 support
● 1.35 Key psychological support – Pre-2025 CAD weakening level
● End-January lows 1.34820
This article and its contents are intended for educational purposes only and should not be considered trading advice. Forex trading is high-risk. Losses may exceed deposits.
