USD/CAD Pushes Toward 18-Month Highs as Falling Oil Weighs on Canadian Dollar

Traders' Opinions

Summary:

USD/CAD holds near 18-month highs around 1.4270 as recovering Middle Eastern oil supply pressures crude and the Canadian Dollar. Softer Fed expectations may limit further upside.

BUY USDCAD

EXP

PENDING

1.42700

Entry Price

1.45500

1.41800

1.42360 -0.00227 -0.16%

Pips

PENDING

1.41800

Exit Price

1.42700

Entry Price

1.45500

USD/CAD continues to climb on Tuesday, extending its advance into a third straight session and trading near 1.4270, close to its strongest level in 18 months. Weakness in the Canadian Dollar remains the main driver as declining crude prices reduce support for the commodity-linked currency.

Oil markets are facing renewed selling pressure as Middle Eastern supply conditions continue to normalize. JPMorgan estimates regional crude exports have recovered to 17.5 million barrels per day, equivalent to roughly 98% of pre-war flows. Refined-product shipments have also improved to around 3 million barrels per day, while Gulf producers continue moving supplies through the Strait of Hormuz despite lingering security concerns.

Signs of improving availability are becoming more widespread. Kuwait says production has recovered to approximately 75% of pre-conflict levels, while Saudi Arabia has aggressively reduced official selling prices for its flagship crude to Asian customers. Together, these developments point toward a less constrained physical market, adding downward pressure on oil and indirectly weighing on the CAD.

The US Dollar side of the equation is less straightforward. Softer American employment figures have significantly reduced expectations for another Federal Reserve hike in October, while falling energy prices are also easing concerns over inflation. Fed funds pricing now assigns a greater than 78% probability of unchanged rates at the upcoming meeting.

For USD/CAD, however, Canadian Dollar weakness is currently outweighing the softer Fed outlook. As long as oil remains under pressure, the pair could retain its upward bias near multi-month highs, although fading US rate expectations may limit the pace of further gains.

Technical Analysis

USD/CAD is pressing into fresh highs on the 4-hour chart, with price trading around 1.4272 after an aggressive advance from the September lows. The structure has shifted decisively in favour of buyers, with successive resistance barriers being cleared as the rally develops.

The key area is the former ceiling around 1.4230–1.4250. Price has pushed through this zone and is now attempting to establish acceptance above it. A brief pullback into the breakout area would not necessarily weaken the setup; instead, a successful retest could provide the foundation for the next leg higher.

The strength of the advance is reinforced by the sequence of higher highs and higher lows that has developed since the September bottom near 1.3750. Previous resistance around 1.3970–1.4000 and 1.4110–1.4140 has already been overcome, leaving those regions as deeper layers of support should a larger correction develop.

If buyers continue defending the 1.4230 region, the next expansion could initially carry USD/CAD through 1.4350–1.4400. Beyond there, the chart leaves room for a much larger extension toward 1.4530–1.4570, broadly matching the projected bullish path.

A sustained move back beneath 1.4180 would begin to weaken the immediate breakout scenario, while a return below 1.4110 would suggest that the current push has lost considerably more momentum.

Overall, the chart favours a shallow correction or consolidation followed by another bullish continuation, rather than an immediate reversal.

TRADE RECOMMENDATION

BUY USD/CAD

ENTRY PRICE: 1.4270

STOP LOSS: 1.4180

TAKE PROFIT: 1.4550

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USD/CAD Pushes Toward 18-Month Highs as Falling Oil Weighs on Canadian Dollar

Technical Analysis

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