Oil prices extended their sharp decline on today as markets grew increasingly confident that a breakthrough in US-Iran negotiations could eventually restore normal energy flows through the Strait of Hormuz. Brent crude slipped back into the $86-87 region, with the break below the psychologically important $90 level reinforcing the view that traders are beginning to unwind part of the geopolitical risk premium. For currency markets, the move has translated directly into renewed pressure on the Canadian Dollar and fresh strength in EUR/CAD.
The latest catalyst came from Iranian state media, which reported that the draft memorandum of understanding between Tehran and Washington includes commitments to reopen the Strait of Hormuz within 30 days and lift US oil sanctions on Iran. According to reports, the 14-point framework would also require the release of part of Iran’s frozen assets, the suspension of oil sanctions and the lifting of the naval blockade before final negotiations begin. While the agreement has yet to be formally signed, the details represent the clearest indication so far that both sides are moving toward a framework that could significantly increase oil supply and ease fears of prolonged disruptions to global shipping routes.
On the Euro side of the equation, support continues to come from ECB’s rate hike this week and lingering expectations that policymakers may not be finished tightening. While a July move is not viewed as the base case, comments from hawks such as Bundesbank President Joachim Nagel have reinforced the message that another hike remains possible if inflation continues spreading beyond energy. Some economists continue to expect at least one additional move later this year, most likely in September. In contrast, markets generally view Bank of Canada will be on hold for the rest of the year.
Technically, EUR/CAD has delivered an important bullish signal by breaking above 1.6176, resuming the rally from 1.5941 after a slightly deeper than expected pullback to 1.6035. The move supports the view that the consolidation from 1.6247 completed at 1.5941 and that the broader rise from 1.5610 is resuming.
Immediate focus now turns to a retest of 1.6247. A firm break there would target 61.8% projection of 1.5610 to 1.6247 from 1.5941 at 1.6335. Beyond that, the 2025 high at 1.6456 would come back into view if oil continues to weaken and ECB tightening expectations remain alive.
