The USD/CAD pair found support at 1.3625, rising towards the 1.3675 area as market participants await the US ADP Employment data. The US Dollar is showing slight gains against the Canadian Dollar, with the pair holding near 1.3650 after a reversal from weekly highs of over 1.3700.
The market is closely watching the ADP report, especially given the delay in the Nonfarm Payrolls release due to a partial government shutdown. The private sector is anticipated to have created a net of 48K jobs in January, an increase from December’s 41K but below the 2024 monthly average of 186K.
Supportive US Data
The US data supports the Federal Reserve’s measured approach to monetary easing, which has also been buoyed by the end of a brief government shutdown. In Canada, the manufacturing sector grew at its fastest rate in over a year, despite weak Gross Domestic Product growth.
Key drivers of the Canadian Dollar include interest rates set by the Bank of Canada, oil prices, economic health, and trade balance. The Bank of Canada influences the CAD through interest rate policies, while oil prices and inflation also play pivotal roles in shaping its value.
We are seeing the USD/CAD pair hold near the 1.3650 mark, influenced by a consistently weak US labor market outlook. The latest ADP employment report showed a gain of only 42,000 jobs, which reinforces the stalled job growth trend we observed throughout 2025. This slow momentum gives the Federal Reserve justification to continue with its gradual monetary easing policy this year.
Economic Signals in Canada
In Canada, conflicting economic signals are creating some uncertainty. The strong manufacturing data from Monday contrasts sharply with last month’s weak GDP figures and recent inflation reports showing core CPI still hovering just above the 3% mark. We will be closely watching Bank of Canada Governor Macklem’s speech this week for any hawkish tone that might support the Loonie.
We must also factor in oil prices, which have been a source of underlying support for the Canadian dollar. WTI crude has maintained a price above $75 per barrel for several weeks, a notable recovery from the lows we experienced in mid-2025. This price stability provides a buffer for the Loonie and complicates a purely bearish outlook on the currency.
Given these factors, the upside for USD/CAD appears limited in the short term. Derivative traders should consider strategies that capitalize on this view, such as selling out-of-the-money call options with strike prices above 1.3750. This approach allows for collecting premium while anticipating that significant upward moves in the pair are unlikely in the coming weeks.
