Canadian Dollar stands firm near September 16 top vs weak USD amid bullish oil prices

The Canadian Dollar (CAD) has remained relatively stable around the September 16 high against the US Dollar (USD) despite a weakening USD. This stability is attributed to the falling crude oil prices, which have capped gains for the commodity-linked Loonie. Nevertheless, the pair is on track to end the third consecutive week in losses.

The US Dollar's decline continues for the third straight day, driven by hopes for Middle East peace talks and a drop in US bond yields. A direct letter from US Vice President JD Vance to Iran's Supreme National Security Council revealed efforts to restart peace negotiations. In addition, Qatar presented Iran with a new peace deal draft.

Meanwhile, investors have flocked to safe-haven government bonds following weak tech earnings, which have raised concerns about potential insufficient returns from rising AI spending. This has negatively impacted the US Dollar and the CAD pair. However, investors remain uncertain due to ongoing tensions between Iran-backed Houthi group and Saudi Arabia, as well as the threat of renewed attacks from the US and Israel after the US midterm elections.

Furthermore, hawkish Federal Reserve (Fed) expectations have contributed to the safe-haven USD attracting buyers near the weekly low. Despite this, traders are cautious as the USD's rise is likely to continue for the third straight week, with the Bank of Canada's recent shift towards monetary tightening after its first rate hike since July 2023 limiting the downside risk for the CAD.