The USD/CAD pair has experienced a modest increase in early Tuesday trading, with attention remaining firmly focused on the 1.38 level. USD/CAD is known for exhibiting significant volatility even under stable conditions, as a large portion of transactions between the United States dollar and the Canadian dollar are driven by necessity due to the two countries’ deep and continuous trade relationship.
Considering the current environment, several additional factors are shaping USD/CAD price action. On the supportive side for the pair, oil prices continue to show softness, and the prevailing interest rate differential still favors the US dollar, even if only marginally. The 1.38 level acting as resistance is technically logical, given its repeated importance in the past. At the same time, weaker oil prices are applying broader pressure on the Canadian dollar, indirectly supporting USD/CAD.
It is important to note that the Canadian dollar’s sensitivity to oil prices is no longer as direct relative to USD/CAD, especially given that the United States now produces roughly 13.5 million barrels per day. Taking all these dynamics into account, USD/CAD appears to be entering a period of relative stability in the near term. This consolidation is largely driven by market participants waiting for employment data from both the United States and Canada, scheduled for release simultaneously on Friday.
The results of these labor market reports could be decisive for USD/CAD, particularly if a meaningful divergence emerges between the two economies. For now, the market seems to be searching for a firm base and a clearer directional signal. A broader consolidation range is likely to develop, with the 1.36 level standing out as a key support area for USD/CAD in the current structure.