The CAD finds support in the context of rising global crude oil prices, which are influenced by intensifying military conflicts in the Middle East. US trade measures prohibit significant Canadian exports such as motor vehicles and dairy in the wake of reciprocal tariff increases. Energy exports provide a buffer for the Canadian dollar amid wider trade tensions and economic challenges emanating from Washington. USD/CAD continues to exhibit a lack of volatility for the third consecutive day, hovering near 1.3780 during the Asian trading session on Wednesday. The currency pair experiences a decline as the commodity-linked Canadian Dollar gains traction from high oil prices, reflecting Canada’s status as a prominent crude exporter.
Crude oil prices have risen in response to a US strike on multiple Iranian tankers near Kharg Island, a significant export hub. These attacks have intensified geopolitical tensions and raised market apprehensions about possible disruptions to global oil supplies. A US official indicated that the strikes were carried out in reaction to an attempted missile assault on a US warship. In response, Tehran initiated a ballistic missile strike targeting Jordan and cautioned vessels operating in the Persian Gulf, advising tanker crews near the ports of Kuwait and Bahrain to promptly evacuate their ships. At the same time, economic tensions are intensifying in the realm of trade. According to BBC reports, US President Donald Trump is implementing a ban on certain Canadian products, including alcohol, dairy, and motor vehicles, in response to the initiation of Canadian retaliatory tariffs on American goods.
The new restrictive measures, scheduled to be implemented by September 29, come in response to Canada’s imposition of tariffs on billions of dollars’ worth of imported American goods. Strategists note that US trade frictions are broadening, with “trade tensions also rising, with President Trump on social media over the past few days to take aim at Canada as Ottawa imposes counter-tariffs.” They highlight that the administration’s campaign for easier policy is becoming more explicit, pointing out that “the president also appeared to threaten a broader trade war unless the Fed cut interest rates in a post last Friday following the strong jobs data as the administration’s pressure campaign for lower rates appears to be stepping up a gear.” Scotiabank adds that the political drumbeat is not limited to the White House, as “VP Vance also suggested the Fed should ease policy last week.” In the daily chart, USD/CAD is positioned at 1.3780, maintaining a bearish near-term outlook as the price remains below both the short- and medium-term Exponential Moving Averages.
The pair is constrained initially by the nine-day EMA at approximately 1.3819, while the 50-day EMA, situated higher around 1.3920, further strengthens the overhead supply, indicating that any rebounds are expected to encounter selling pressure. The 14-day Relative Strength Index at approximately 38 remains below the midline, indicating that selling pressure continues to dominate over buying interest, even in the absence of oversold conditions. On the topside, a daily close above the nine-day EMA would indicate the initial signs of sellers losing control; however, only a recovery toward the 50-day EMA would begin to undermine the broader bearish structure. Until these resistances are reclaimed, rallies are likely to be interpreted as corrective within the current negative sentiment.
