**US Dollar Forecast: USD/CAD Extends Three-Day Rally on Robust US Economic Data and Oil Price Weakness**
*Adapted and expanded from an article by Diego Colman, FOREX.com (original available at forex.com)*
The US Dollar (USD) is once again showing strength against the Canadian Dollar (CAD), with the USD/CAD pair posting a three-day winning streak as of early September 2025. A combination of strong US economic data, rising Treasury yields, and falling crude oil prices has underpinned the latest rally in USD/CAD. Traders are now trying to assess whether this uptrend will sustain, especially with upcoming macroeconomic releases and fluctuating risk sentiment.
In this article, we’ll explore the technical and fundamental drivers behind USD/CAD’s recent performance, analyze broader US dollar trends, and assess the potential paths the currency pair might follow for the rest of the month. We also investigate how the global energy market and Canadian economic data could influence future price action.
## US Economic Data Surpasses Expectations
Much of the recent strength in the US dollar can be attributed to consistently positive economic releases, supporting the Federal Reserve’s cautious position on interest rates. Two primary data points released recently have helped boost the greenback:
– **US ISM Manufacturing PMI**: The Institute for Supply Management’s manufacturing index came in better than expected, with a reading of **49.1**, beating the forecast of **47.0**. While still indicating contraction (below 50), the number surprised markets with its resilience and offered evidence that the manufacturing slowdown may be bottoming out.
– **Job Openings and Labor Turnover Survey (JOLTS)**: The JOLTS report showed **8.8 million job openings** in August, down from previous months but still high enough to keep labor market pressures intact. The data supports the idea that demand for labor in the US remains robust, giving the Federal Reserve more breathing room to hold interest rates higher for longer.
These economic signals reinforce the Fed’s message: inflation is still too sticky to declare victory, and monetary policy must remain tight.
### Market Reaction
– **US Treasury Yields Rise**: Following the upbeat data, Treasury yields climbed significantly. The 10-year yield hovered near **4.30%**, its highest level in several weeks, signaling market confidence in a resilient economic outlook.
– **Fed Funds Futures Pricing**: Futures traders have pushed back the timeline for potential rate cuts, with expectations now tilted toward mid-2026 instead of early 2025. This offers momentum to the dollar across the board.
## Oil Prices and Their Impact on the Canadian Dollar
The Canadian Dollar is highly sensitive to fluctuations in crude oil due to Canada’s position as a major oil exporter. Over the past week, WTI (West Texas Intermediate) oil prices dropped toward **$82 per barrel**, off from recent highs above **$87**.
### Key Factors Behind Oil’s Decline:
– **Waning Demand Concerns**: Data from China, the world’s largest oil importer, has pointed to weaker-than-expected industrial activity. The country’s manufacturing PMI missed forecasts, sparking concerns over global demand.
– **Stronger US Dollar**: A rising dollar has historically been associated with lower commodity prices, especially oil. As oil is priced in dollars, a stronger USD makes oil more expensive for international buyers.
– **Rising Inventories**: The US Energy Information Administration (EIA) reported a surprise build in crude oil reserves, suggesting that current supply may be adequate to meet demand, at least in the short term.
As oil corrected, so did the Canadian Dollar, which often correlates positively with crude. The result was a further tailwind for the USD/CAD pair.
## Bank of Canada’s Neutral Stance Adds to CAD Weakness
While the Federal Reserve continues to emphasize a cautious stance with inflation risks still prominent, the Bank of Canada (Bo
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