USD/CAD price slips amid strong loonie and oil gains
USD/CAD holds near mid-1.4300s as crude oil gains support the Loonie
The USD/CAD pair remained under pressure on Wednesday, trading near the mid-1.4300s during the Asian session. The pair failed to extend its bounce from sub-1.4300 levels, weighed down by a combination of factors that supported the Canadian dollar (CAD).
Crude oil prices continued to hover near multi-month highs, reinforcing the Loonie, a commodity-linked currency, while political optimism in Canada further bolstered market sentiment. Hopes that Canada could avoid significant US tariffs under the Trump administration have also lent support to the domestic currency.
USD/CAD price movement (Nov 2024 - Jan 2025) Source: TradingView.
Oil and Geopolitical Tensions Shape USD/CAD Moves
Firm crude oil prices, driven by geopolitical uncertainties related to the Russia-Ukraine war and tensions in the Middle East, have provided a cushion for the CAD. The commodity's resilience has offset some of the US dollar's strength, which remains supported by elevated US Treasury bond yields. Positive US economic data released earlier this week pointed to a robust economy, maintaining expectations for slower interest rate cuts by the Federal Reserve in 2025. These factors have limited the USD’s losses despite an overall bearish sentiment surrounding the pair.
Market Awaits Key US Economic Data and Fed Minutes
Looking ahead, investors are focusing on upcoming US economic releases, including the ADP private-sector employment report and initial jobless claims data, which could provide fresh insights into labor market trends. However, the spotlight remains on the Federal Open Market Committee (FOMC) meeting minutes due later in the day. The minutes are expected to offer critical clues regarding the Fed’s monetary policy trajectory and could significantly influence the USD/CAD pair’s next move.
Despite short-term bearish pressures, analysts warn against aggressive bearish bets on USD/CAD due to potential dip-buying amid heightened global uncertainties. Any unexpected developments from the FOMC minutes or geopolitical shifts could trigger volatility in the forex market.
In our previous analysis, we highlighted how Trudeau's resignation boosted the Canadian dollar and added volatility to the pair amid concerns over US tariff policies. These themes continue to shape USD/CAD movements as the market reacts to both economic releases and political developments.
