The Canadian dollar held small losses against the US dollar on Friday, with USD/CAD trading just above 1.3800 after rebounding from two-week lows at 1.3765. Even so, the loonie was still set for a 0.7% weekly gain, while the USD/CAD weekly chart was forming a bearish engulfing candle ahead of August labour-market releases from both countries. Markets were also tracking oil, Canada’s key export, after renewed US-Iran attacks and threats lifted crude prices.
Brent advanced about 6.5% over the week, reaching one-and-a-half-month highs above $96.00 on Thursday before easing below $94.00 on Friday. Bloomberg consensus forecast Canada added 15,000 jobs in August, while US nonfarm payrolls were expected to rise by 56K after a 23K decline in July. Attention also extended to next week’s CPI data and Federal Reserve policy signals, after New York Fed President John Williams said inflation was slowly trending lower and that current policy rates were in a good place for the economy. The update also corrected at 12:10 GMT his title as New York Fed President.
USD/CAD Technical Setup and Oil Impacts
We see a strong technical setup today on September 4, 2026, as the USD/CAD weekly chart forms a bearish engulfing candle near the 1.3800 level. This pattern historically suggests downward pressure, meaning derivative traders should consider shorting USD/CAD or buying CAD call options. If the pair breaks below the recent two-week low of 1.3765, we could see a rapid acceleration toward the 1.3650 support zone.
The Loonie’s strength is heavily backed by Brent crude oil’s recent 6.5% spike to over $96.00, driven by escalating geopolitical tensions. Although oil has pulled back slightly to around $94.00, energy derivative traders can use long call options on crude to hedge against further supply shocks. We expect oil’s volatility to keep the Canadian Dollar well-supported, even if domestic economic data fluctuates.
Labour Market Data and Trading Strategies
With Canadian jobs expected to grow by 15,000, we must prepare for the historical tendency of this data to trigger massive, unexpected swings. Traders can capture this potential volatility by setting up a straddle strategy on CAD crosses ahead of the release. If we get a strong upside surprise, the CAD will likely rally sharply, making short-term CAD call options highly profitable.
On the US side, while the market expects Nonfarm Payrolls to rebound to 56,000, we anticipate the immediate USD reaction will be muted. Investors are looking past the jobs report to next week’s crucial Consumer Price Index (CPI) data to gauge the Federal Reserve’s next interest rate move. Consequently, we recommend traders focus on range-bound derivative strategies for the USD in the very near term, before buying protection against CPI-driven volatility next week.
