Loonie Gains as Oil Rises, U.S. Data Weighs on Dollar

Key Moments

Dollar/CAD Retreats as Yen Rally and Data Hit Greenback

USD/CAD continues to edge lower for the second straight session, trading near 1.3830 during Asian hours on Thursday. The pair is under pressure as a sharp advance in the Japanese Yen (JPY) has dragged on the U.S. Dollar (USD). The Yen’s move has been driven by heightened speculation that authorities have conducted a rate check and may be preparing to step into foreign exchange markets to support the currency.

The Greenback also faces headwinds from weaker U.S. labor market signals. Economic figures released on Wednesday showed a slowdown in U.S. private employment growth for August. Despite that softer backdrop, market pricing still reflects roughly a two-thirds probability that the Federal Reserve will raise interest rates later this month.

U.S. Labor Data in Focus Ahead of Key Releases

According to ADP, U.S. private-sector employment increased by 38,000 positions in August, undershooting expectations of 47,000 and slipping below July’s revised gain of 46,000. In response, investors are paying closer attention to upcoming U.S. data, with Thursday’s weekly jobless claims and Friday’s broader August payrolls report expected to provide clearer guidance on the likely trajectory of monetary policy.

Oil-Supported CAD Gains Amid Middle East Tensions

The move lower in USD/CAD coincides with renewed strength in the commodity-linked Canadian Dollar (CAD), which is benefiting from rising crude oil prices. The oil advance comes as markets weigh escalating geopolitical risks in the Middle East against ongoing efforts to secure and reopen the Strait of Hormuz.

Adding to the focus on the region, President Donald Trump said that recent strikes on Iran would be short-lived, while stressing that the U.S. is prepared to undertake additional military action. He also reiterated claims of U.S. control over the strategically critical trade strait.

Scotiabank: Upside Bias in USDCAD, But Fair Value Seen Lower

Commentary from Scotiabank points to a key technical threshold in USDCAD following the pair’s recent advance. Analysts note that “sustained USD gains through 1.3930 (38.2% retracement resistance from the July/August USD decline) target a push on the 1.40 zone.” They argue this supports the view that spot is now trading above fair value, with price dynamics tilting toward a potential test of the psychologically important 1.40 level if current momentum persists.

Technical Picture: Near-Term Bias Remains Bearish

On the daily chart, USD/CAD trades around 1.3830 with a bearish short-term tone, as price holds below both the nine- and 50-period Exponential Moving Averages (EMAs). The shorter EMA is positioned beneath the longer one, and both sit above spot, indicating that the latest rebound is encountering overhead supply. Meanwhile, the 14-day Relative Strength Index (RSI) is near 41.2, signaling subdued momentum rather than oversold conditions and pointing to ongoing but moderate selling pressure.

On the upside, immediate resistance appears at the nine-period EMA near 1.3858, followed by a stronger barrier at the 50-period EMA around 1.3941, and further up at a more distant structural resistance at 1.4248. On the downside, the next notable support is a horizontal level at 1.3482, where buyers would be expected to reemerge if the decline deepens, leaving room for further weakness between current levels and that floor.