Canadian Dollar gains against US Dollar despite weaker Oil prices

  • USD/CAD falls 0.15% on Tuesday and trades around 1.4240 despite persistent pressure on the Canadian currency.
  • Recovering Middle East Oil exports fuel expectations of higher global supply and weigh on crude prices.
  • Improving US private employment provides some support to the US Dollar, although monetary policy expectations limit its rebound.

USD/CAD falls 0.15% on Tuesday and trades around 1.4240 at the time of writing, pulling away slightly from recent highs near 1.4300. The Canadian Dollar (CAD) nevertheless remains vulnerable, weighed down by falling Oil prices as signs of improving global crude supply continue to emerge.

Análisis de TMGM: noticias de mercados financieros, calendario económico e información del mercado

Oil prices remain weak amid recovering exports from the Middle East. According to JPMorgan, crude shipments from the region have reached 17.5 million barrels per day, around 98% of pre-war levels, while flows of refined products, including diesel and gasoline, have recovered to 3 million barrels per day.

The improvement in supply comes after the Group of Seven (G7) nations agreed on Friday to release 100 million barrels of diesel and crude from emergency reserves. Kuwait also reported that its Oil production has recovered to around 75% of pre-conflict levels, while Saudi Arabia has lowered its official selling prices for Asian buyers.

The prospect of more abundant supply therefore keeps pressure on Oil prices. This remains a negative factor for the Canadian Dollar, as Canada is a major Oil-exporting country and fluctuations in crude prices can have a significant impact on the Canadian currency.

However, Tuesday's decline in USD/CAD suggests that weakness in Oil prices is not enough to fuel an immediate extension of the pair's recent rally. On the US side, the latest employment figures provide a more encouraging signal. The National Employment Report (NER) Pulse from Automatic Data Processing (ADP) showed that US private employers added an average of 23.750K jobs per week during the four weeks ending September 19, up from 22.50K previously.

This modest acceleration in hiring contrasts with recent signs of cooling in the US labor market. It could provide some support to the US Dollar, although investors continue to assess the outlook for Federal Reserve (Fed) monetary policy following recent disapointing employment figures and easing pressures from energy prices.

Expectations surrounding the Fed's next policy decision should therefore remain an important driver for USD/CAD, while developments in Oil prices will continue to determine the Canadian Dollar's ability to recover.

Canada labor data seen soft as BoC pricing leaves Dollar exposed

Brown Brothers Harriman’s Elias Haddad points to Friday’s release of Canada’s September labor force survey as a key test for the domestic outlook, with the economy expected to add “just +5.0k jobs after losing -41.7k jobs in August.” BBH notes that the “unemployment rate is seen rising 0.1ppt to 6.5% on an unchanged participation rate of 65.0%, pointing to weak labor demand,” underscoring a fragile backdrop for hiring.

Against this softer labor picture, BBH argues that “BoC rate hike pricing (100bps in the next twelve months) looks too aggressive and leaves CAD vulnerable to a dovish repricing.” The bank stresses that “Canada core inflation is near the banks’ 2% target and indicators point to continued excess supply in the economy,” suggesting limited justification for the current degree of tightening embedded in the curve and, in turn, a potentially vulnerable Canadian Dollar.

USD/CAD technical analysis

Chart Analysis USD/CAD


In the one-hour chart, USD/CAD trades at 1.4247, holding a constructive intraday bias as it remains above both the 100-period simple moving average (SMA) near 1.4244 and the 200-period SMA around 1.4203. Price action is grinding higher from the day’s open at 1.4263 but still faces immediate overhead supply at the horizontal resistance aligned with 1.4260, while the latest Relative Strength Index (14) reading around 42 suggests only modest, consolidative momentum rather than overbought conditions.

On the downside, initial demand is seen at the minor horizontal support at 1.4232, followed by a broader support band formed by 1.4200 and 1.4175, ahead of deeper levels at 1.4150 and 1.4133. On the topside, a break above the 1.4260 barrier would open the way toward the next resistance at 1.4293, where buyers would need to overcome a more significant supply zone to extend the hourly uptrend.

(The technical analysis of this story was written with the help of an AI tool. Know more.)