The Canadian Dollar slightly declined by 0.05% against the US Dollar on Thursday, adding to its 1.5% decrease since last week’s 15-month high. Early February shows a 0.4% drop for the CAD, pushing USD/CAD back to the 1.3700 region, amid negative US employment figures that have affected market sentiment. Key Canadian labour data is anticipated; meanwhile, US Nonfarm Payrolls data has been delayed to next Wednesday.
Technical Analysis and Trends
Technical analysis shows USD/CAD at 1.3671, below the 50- and 200-day EMAs, reinforcing a bearish trend. The 50-day EMA at 1.3779 and 200-day EMA at 1.3862 set resistance levels. Stochastic rebounded to 38.48, indicating stabilising momentum but remaining bearish unless a daily close above the 50-day EMA occurs. A break above the 50-day EMA could shift momentum, but staying below maintains the downward trend.
Key factors influencing the Canadian Dollar include interest rates set by the Bank of Canada, oil prices, economic health, inflation, and trade balance. Higher oil prices and interest rates generally support CAD, influencing its demand. Macroeconomic data such as GDP, employment figures, and consumer sentiment also impact CAD, with stronger data potentially leading to higher interest rates.
Given the recent rebound in USD/CAD from the lows we saw back in October 2025, we should adjust our positions for continued Canadian dollar weakness. The pair has climbed back into the 1.3700 region, and the underlying momentum appears to favor the US dollar for now. This shift suggests that fading any Loonie strength is the prudent move over the next few weeks.
The Canadian labour market data released this morning reinforces our cautious stance on the CAD. The report showed that Canada’s unemployment rate unexpectedly ticked up to 6.3% while the economy added only 8,000 jobs, falling well short of the 15,000 that was anticipated. This weak domestic data provides little reason for the Bank of Canada to consider a hawkish turn, keeping pressure on the currency.
Furthermore, the price of Western Canadian Select (WCS) oil, a key driver for the Loonie, has softened, dropping 4% over the past month to trade near $72 a barrel. This trend is driven by recent reports of higher-than-expected global inventories. Looking back at similar periods of oil weakness in 2025, the CAD consistently underperformed, a pattern we expect to see repeat.
Impact of Delayed US Nonfarm Payrolls
With the crucial US Nonfarm Payrolls data now delayed until next Wednesday, we are in a period of uncertainty that is weighing on investor sentiment. This delay creates an opportunity, as short-term volatility options may be underpriced. We see this as a chance to position for a potential spike in the pair following the US employment release.
The technicals support a bearish outlook for the CAD, as the USD/CAD remains capped by its 50-day moving average around 1.3779. We should view this level as a key area to initiate or add to short CAD positions. Buying near-term USD/CAD call options with strike prices just below this resistance level offers a defined-risk way to capitalize on a continued move higher.
Hedging against a sharp reversal is still important, as a surprisingly weak US jobs report could trigger a rush out of the Greenback. Purchasing cheap, out-of-the-money put options with a strike price near 1.3550 could provide effective downside protection. This strategy allows us to maintain our core view while managing risk around next week’s major event.
