CAD Weakens as Oil Prices Plummet Amid Tensions in Strait of Hormuz
The Canadian Dollar (CAD) has weakened against the US Dollar (USD), driven by falling crude oil prices and a strengthening USD. The USD/CAD pair has extended its gains for five consecutive days, trading around 1.4140 during Asian hours on Friday.
The decline in oil prices is attributed to reports that the United States and Iran are considering a phased agreement to reopen the Strait of Hormuz and lift the US blockade on Iranian ports. However, both nations maintain firm positions, with Iran refusing to enter any agreement unless the US lifts its port blockade and reduces military pressure.
The USD/CAD pair is also benefiting from hawkish signals from Federal Reserve officials, including Paulson's recent speech. He emphasized that the US central bank may need to raise interest rates again to combat stubbornly high inflation. The CME FedWatch Tool indicates a 67.5% likelihood of an October benchmark rate hike, up from 55.4% a week prior and just 11% a month ago.
According to technical analysis, USD/CAD is trading above both the nine-period Exponential Moving Averages (EMAs) at 1.4048 and the 50-period EMA at 1.3955, reinforcing a firm bullish near-term bias. The short-term EMA has crossed well above the longer one, hinting at an upward trend structure.