Canadian Dollar rises on weaker US Dollar, rising oil prices

USD/CAD extends its losses for the second consecutive day, trading around 1.3830 during the Asian hours on Thursday. The currency pair experiences downward pressure as a sharp rally in the Japanese Yen (JPY) weighed heavily on the US Dollar (USD). This surge was fueled by growing market speculation that authorities conducted a rate check and may be preparing to intervene directly in foreign exchange markets to bolster the Yen.

Meanwhile, the Greenback faced additional headwinds following Wednesday's economic data, which revealed a slowdown in US private employment growth for August. Despite these weaker labor signals, financial markets continue to price in roughly a two-thirds probability that the Federal Reserve will raise interest rates later this month.

US private-sector job growth slowed in August, adding just 38K positions, missing the expected 47K and dropping below July’s revised 46K gain, according to ADP data. Market participants are now closely monitoring upcoming US economic indicators, focusing on Thursday’s weekly jobless claims and Friday’s comprehensive August payrolls report for clearer direction on the monetary policy path.

The USD/CAD pair moved lower as the commodity-sensitive Canadian Dollar (CAD) gained ground, supported by rising crude oil prices. The oil rally comes as investors evaluate escalating geopolitical tensions in the Middle East alongside ongoing efforts to secure and reopen the Strait of Hormuz. Broadening the market's focus, President Donald Trump stated that recent strikes on Iran would be short-lived, though he emphasized that the US stands ready for additional military action while reiterating assertions of US control over the vital trade strait.

USDCAD upside bias builds as Scotiabank flags key resistance break

Analysts at Scotiabank highlight that the recent advance in USDCAD has brought the pair up against a pivotal technical level, noting 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.” This reinforces their view that spot is now trading above fair value, with price action increasingly skewed toward a test of the psychologically important 1.40 area if the current momentum is maintained.

Technical Analysis:

In the daily chart, USD/CAD trades at 1.3830, maintaining a bearish near-term bias as it holds below both the nine- and 50-period Exponential Moving Averages (EMAs). The short-term EMA sits under the longer one and both above spot, suggesting the recent rebound is capped by overhead supply, while the 14-day Relative Strength Index (RSI) near 41.2 keeps momentum subdued rather than oversold, hinting at persistent but measured selling pressure.

On the topside, immediate resistance emerges at the nine-period EMA near 1.3858, followed by the denser barrier at the 50-period EMA around 1.3941, before a more distant structural ceiling at 1.4248. On the downside, the next meaningful support is the horizontal level at 1.3482, where buyers would be expected to reappear if the pair extends its slide, leaving the path between current levels and that floor relatively open to further weakness.