USD/CAD hangs near daily low, around 1.4000 amid modest uptick in Oil prices

USD/CAD attracts some sellers on Tuesday and is pressured by a combination of factors.
An uptick in Oil prices underpins the Loonie and weighs on the pair amid a softer USD.
The downside, however, seems limited as traders seem reluctant ahead of the US data.

Haresh Menghani FXStreet

The USD/CAD pair extends the previous day's late pullback from the vicinity of the 1.4100 mark and continues losing ground through the first half of the European session on Tuesday. The intraday slide is sponsored by a combination of factors and drags spot prices closer to the 1.4000 psychological mark in the last hour.

Despite a ceasefire deal between Israel and the Lebanon-based Hezbollah militant group, geopolitical risk premium remains in play amid the worsening Russia-Ukraine conflict. Apart from this, expectations that the Organization of Petroleum Exporting Countries and allies (OPEC+) would further delay plans to increase production lend support to Crude Oil prices for the second straight day. This, along with reduced bets for a bigger rate cut by the Bank of Canada (BoC) in December, undermines the commodity-linked Loonie and exerts some pressure on the USD/CAD pair amid a modest US Dollar (USD) downtick.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, fails to build on the overnight bounce from a nearly three-week low amid a greater chance that the Federal Reserve (Fed) will cut rates in December. Investors, however, seem convinced that US President-elect Donald Trump's expansionary policies will reignite inflationary pressures and force the Fed to keep rates higher for a longer period. This, in turn, provides a modest lift to the US bond yields and lends support to the USD. Apart from this, concerns about Trump's tariff plans should cap the Canadian Dollar (CAD) and the USD/CAD pair.

Traders now look to the release of the US JOLTS Job Openings for short-term opportunities later during the North American session. Apart from this, this week's important US macro data, including the closely watched Nonfarm Payrolls (NFP) report, and Fed Chair Jerome Powell's speech should provide some cues about the interest rate outlook in the US. This, in turn, will play a key role in driving the USD demand and provide some meaningful impetus to the USD/CAD pair. Investors will also keep a close eye on the crucial OPEC+ meeting on Thursday, which should influence Oil price dynamics in the near term.

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

How do the decisions of the Bank of Canada impact the Canadian Dollar?

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

How does the price of Oil impact the Canadian Dollar?

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

How does inflation data impact the value of the Canadian Dollar?

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

How does economic data influence the value of the Canadian Dollar?

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

AUD/USD remains above 0.7200 after China's trade data

AUD/USD sits above 0.7200 in the Asian session on Tuesday, near its highest level since May 14. The US Dollar stays under pressure as a rallying Japanese Yen outweighs support from hawkish Fed bets and geopolitical tensions. This, along with firming expectations for another RBA rate hike later this month, acts as a tailwind for the Aussie. However, mixed China trade balance data keep the pair restricted.

USD/JPY rebounds above 154.00 as markets assess BoJ outlook

USD/JPY rebounds from the six-month low it touched below 153.00 earlier in the day and trades above 154.00 in the second half of the day. Nevertheless, the upside attempts resemble technical corrections for now as Japan's upbeat wage growth data and Q2 GDP revision cement bets on a BoJ rate hike next week and continue to support the Japanese Yen.

Gold reverses early gains as US Dollar rebounds, Oil prices rise

Gold (XAU/USD) struggles to hold early gains and reverses course on Tuesday as a modest rebound in the US Dollar (USD) and rising Oil prices weigh on the precious metal. At the time of writing, XAU/USD trades around $4,400 after reaching an intraday high near $4,443.

Ripple and Stellar outlook: Hold bullish bias above EMAs as derivatives back upside

Ripple (XRP) and Stellar (XLM) hold above the key support zones on Tuesday, hinting at an upside move. Derivatives metrics further support the recovery, with both altcoins showing positive funding rates and rising long positions. Derivatives data shows a bullish tilt among XRP and XLM traders.

Europe in focus: September 2026

Six major net contributors demanded substantial cuts to the European Commission’s proposed 2028–2034 EU budget. Germany, Denmark, the Netherlands, Austria, Finland and Sweden issued a joint position on 27 August calling for the nearly €2 trillion proposal to be reduced by several hundred billion euros and rejecting additional common EU borrowing.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.