USD/CAD remains near an 18-month high of 1.4293 as the Canadian Dollar faces challenges due to declining oil prices. JPMorgan reports that Middle East crude exports have reached 17.5 million barrels daily, approaching 98% of pre-war volumes, while refined products have attained 58%. Softer employment data negatively impacts the US Dollar by diminishing expectations for a Federal Reserve interest rate hike in October. USD/CAD extends its gains for the third consecutive day, trading around 1.4270 during European hours on Tuesday. The pair remains near recently attained 18-month highs as the commodity-linked Canadian Dollar faces challenges due to declining oil prices. Crude oil prices are experiencing downward pressure as indications mount that Middle East crude exports are recovering toward levels seen prior to the conflict.
JPMorgan reports that crude shipments from the region have rebounded to 17.5 million barrels per day, approximately 98% of pre-war levels, whereas refined product flows, including diesel and petrol, have attained 3 million barrels per day, equating to 58% of typical capacity. Gulf producers persist in augmenting supply via the Strait of Hormuz, undeterred by prevailing maritime risks. Iraq is proactively pursuing additional vessels to facilitate the transportation of its cargoes through this critical transit route. Further emphasising the alleviation of supply constraints, Kuwait indicated that its oil production has rebounded to around 75% of pre-conflict levels. Meanwhile, Saudi Arabia has sharply reduced official selling prices for its flagship crude grade to Asian buyers, indicating an increase in physical availability and a gradually loosening global oil market.
However, the upside of the USD/CAD pair could be restrained as the US Dollar faces challenges amid softer US employment data, which has significantly dampened expectations for a Federal Reserve interest rate hike in October. A decline in crude oil prices has alleviated inflation worries and reduced the urgency for tightening monetary policy. In light of the evolving market sentiment, the CME FedWatch Tool indicates that traders are assigning a probability exceeding 78% to the likelihood that the Federal Reserve will maintain the current interest rates at its next meeting. In the daily chart, USD/CAD is trading at 1.4270, continuing its upward trajectory with a distinct bullish near-term bias as the price remains above both the nine- and 50-period Exponential Moving Averages.
The alignment of shorter and longer EMAs below spot reinforces a supported tone, while the 14-day Relative Strength Index at 78.96 indicates overbought conditions, suggesting the rally is extended but continues to be propelled by robust upside momentum. The FXS Fed Sentiment Index at 137.58 remains elevated, indicating that broader policy expectations continue to support demand for the pair. On the topside, the next significant resistance is the horizontal barrier at 1.4794, which serves as a medium-term upside objective should buyers maintain control. On the downside, initial support is observed at the nine-period EMA at 1.4202, followed by a more substantial structural floor at the 50-period EMA near 1.4022. A pullback in this region could attract new buying interest, provided that the overarching bullish configuration continues to hold.
