Title: Canadian Dollar Holds Steady as Oil Prices Rebound and US Dollar Gains Moderate
By: FXStreet, originally authored by Haresh Menghani
Expanded and Rewritten Version by AI Writer
The Canadian dollar (CAD), also known as the loonie, found some firmness on Friday, as it benefitted from a modest rebound in crude oil prices, which kept the currency from extending its previous declines. At the same time, the US dollar showed limited upward pressure, allowing the CAD to stabilize after several sessions of volatility. The balance of these opposing forces contributed to a sideways movement in the USD/CAD currency pair, which remains a key focus for forex traders looking to interpret broader economic and geopolitical signals.
Key Highlights:
– The Canadian dollar showed stability after losses earlier in the week.
– A mild recovery in crude oil prices supported CAD demand.
– The US dollar’s upward momentum softened, reducing pressure on the loonie.
– Market attention is now turning towards Canadian jobs data and US economic indicators for further direction.
Crude Oil Prices Lift the Loonie
As one of the world’s top oil-exporting nations, Canada’s domestic currency is heavily influenced by commodity price movements, particularly crude oil. On Friday, WTI crude prices witnessed a moderate uptick, recovering some of the week’s losses. This provided a much-needed tailwind for the Canadian dollar.
– West Texas Intermediate (WTI) crude futures climbed above $82 per barrel after falling earlier in the week.
– Despite market volatility, hope for demand growth and tighter global supply underpinned oil price stability.
– According to data from the U.S. Energy Information Administration (EIA), a larger-than-expected drawdown in crude inventories signaled ongoing strength in consumption, supporting prices.
– The Organization of the Petroleum Exporting Countries and allies (OPEC+) have reiterated plans to keep cuts in place, sparking speculation of further supply tightness.
Because oil exports are a major contributor to Canada’s GDP and trade balance, any movement in the price of oil has a significant impact on CAD flows. The recovery helped the currency regain investor confidence and limited its downside, especially against a softer greenback.
US Dollar Rally Pauses
The US dollar lost some of its earlier momentum, enabling other currencies, including the CAD, to find stronger footing. After rising on expectations that the Federal Reserve would keep interest rates higher for longer, the greenback ran into key resistance as yields began to pull back.
– The US Dollar Index (DXY), which tracks the dollar against a basket of major currencies, softened slightly to trade near 106.30 on Friday.
– This came as investors digested mixed US data, including jobless claims and private payrolls, hinting at a potential slowdown in hiring momentum.
– Treasury yields, especially the 10-year benchmark, retreated from their recent highs, reducing the dollar’s yield appeal.
– Uncertainty surrounding Fed policy and the potential for a “soft landing” scenario in the US economy kept actual rate expectations muted.
Market participants are increasingly cautious about the Fed’s next move. While rates are expected to remain higher in the near term, the likelihood of additional hikes is becoming less certain. According to CME Group’s FedWatch Tool, traders have priced in less than a 30 percent chance of a rate hike before the end of the year. This shift is indirectly offering support to currencies like the CAD.
USD/CAD Technical Overview
The USD/CAD pair has traded in a narrow range as traders take a wait-and-see approach ahead of key economic releases. While fundamental forces offer mixed signals, technical indicators suggest a potential pause in the recent uptrend.
– The pair pulled back from its weekly highs near 1.3785.
– Immediate support is seen near 1.3660, while resistance remains at 1.3780 and above that at 1.3840.
– The Relative Strength Index (RSI) signals overbought conditions for the USD
Read more on USD/CAD trading.