• The US Dollar tumbles against the Canadian Dollar this week as a US-Iran ceasefire crushed safe-haven demand.
• The pair slid from 1.3965 to a low near 1.3800, its steepest weekly decline since late January.
• Oil prices whipsawed on ceasefire headlines, with WTI swinging from above $110 to below $100 before rebounding.
• The US Dollar Index fell below 99 for the first time in a month as rate cut expectations returned.

USD/CAD has shed nearly a full percent since the start of the week, sliding from the 1.3965 area to trade near the 1.3800 handle on Thursday. The move accelerated sharply on Tuesday evening after the US and Iran agreed to a Pakistan-brokered two-week ceasefire, pulling the rug out from under the Greenback's wartime safe-haven bid.

A ceasefire nobody expected

The timing was dramatic. With just hours remaining on President Donald Trump's deadline for Iran to reopen the Strait of Hormuz, Pakistan's Prime Minister Shehbaz Sharif announced that both sides had agreed to an immediate ceasefire. Trump confirmed the deal on Truth Social, calling Iran's 10-point proposal a "workable basis on which to negotiate." The announcement sent shockwaves through FX markets, with the Bloomberg Dollar Spot Index dropping as much as 1.1% on Wednesday, its steepest single-day decline since January. The Greenback fell against all 16 major peers as traders rapidly unwound one of the conflict's most crowded trades: long US Dollars.

For USD/CAD specifically, the selloff was amplified by the Oil channel. WTI plunged over 10% intraday as the prospect of Hormuz reopening flooded back into the pricing. While cheaper Oil is typically a headwind for the Canadian Dollar, the broader risk-on impulse and collapsing US Dollar more than offset any commodity drag. The loonie caught a strong bid as funds rotated out of defensive positioning.

The rate expectations reset

Perhaps the most consequential shift this week has been in Federal Reserve (Fed) expectations. Before the ceasefire, markets had priced out any chance of a Fed rate cut, with traders even flirting with the possibility of a hike to combat Oil-driven inflation. That narrative flipped overnight. With Oil back below $100 and the immediate threat of an inflationary spiral receding, rate futures have begun pricing at least one cut back into the 2026 curve. Minutes from the Federal Open Market Committee's (FOMC) March meeting, released Wednesday, showed policymakers were split, with some viewing a hike as potentially necessary while others still expected a cut this year. The ambiguity is keeping the Dollar on the back foot.

On the chart, the damage is clear

The hourly chart tells the story neatly. USD/CAD peaked near 1.3965 last Friday and has been in a near-vertical decline since, breaking below the Parabolic SAR and slicing through the 1.3900 and 1.3850 levels with minimal consolidation. The RSI on the hourly timeframe dipped into oversold territory below 30 earlier this week before staging a modest recovery to the mid-40s, suggesting the initial selling impulse may be losing momentum around the 1.3800 to 1.3850 zone.

But don't call it a bottom yet

Thursday's price action suggests the easy part of the move may be done, but the hard part is just beginning. The ceasefire is already showing cracks. Iran accused the US of violating the deal after Israel continued strikes on Lebanon, while the Strait of Hormuz remains functionally closed. Oil has bounced back above $97, and the DXY has steadied near 99 as risk appetite fades. VP Vance is set to lead a US delegation to Islamabad for talks on Saturday, and traders will be watching closely to see whether the fragile truce holds or collapses.

The data calendar adds another layer of uncertainty. US March Consumer Price Index (CPI) data drops on Friday, offering the first real look at how the conflict has impacted consumer prices. A hot print could quickly revive rate hike fears and snap the Dollar back to life, while a soft number would reinforce the rate cut repricing and potentially push USD/CAD toward the 1.3750 to 1.3700 zone.

For now, the pair is stuck between a ceasefire bid and a fragile peace. The 165-pip drop this week says the market wanted this truce badly. Whether it survives the weekend is another question entirely.

USD/CAD 1-hour chart