Canadian Dollar slips ahead of jobs data from the US and Canada

USD/CAD strengthens towards 1.4050 as Friday’s European trading gets under way.
The US Dollar finds support as cautious sentiment drives demand for safe-haven assets.
With US and Canadian jobs data due later on Friday, traders prepare for the releases.

Safe-haven demand following the US equity sell-off lifts the US Dollar (USD) against the Canadian Dollar (CAD), pushing USD/CAD towards 1.4050 in early European trade on Friday. A more cautious mood could take hold later on Friday as markets await employment figures from both the US and Canada.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Control of the Senate and House of Representatives passes from Republicans to Democrats as the latter secure a majority. Tens of millions of voters delivered a sharp rebuke to President Donald Trump, with Democrats recording major victories in several Republican strongholds for the first time in decades.

For further indications of the US interest rate outlook, traders will scrutinise the US employment report. October Nonfarm Payrolls (NFP) are expected by economists to rise by 65,000, compared with September’s increase of 29,000. Forecasts put the Unemployment Rate unchanged at a very low 4.2%.

Stronger-than-anticipated readings in the reports could bolster the argument for US rate increases, lending support to the Greenback. Conversely, evidence of a softer US labour market could weigh on the USD in the near term.

Referring to the NFP figures, MUFG analysts said: "Recent data suggests improvement in the labour market, and we expect that to continue with this report,"

In Canada, the consensus points to a modest increase of 13,600 jobs in October, as markets anticipate the economy will recover part of its earlier losses. Canada’s Unemployment Rate is forecast to remain at 6.5% in October.

Can the Loonie sustain gains as Scotiabank questions fundamentals and flags USD/CAD support?

Despite the Canadian Dollar’s appreciation, Scotiabank analysts highlight its comparatively subdued showing: “the loonie’s relative performance is somewhat more underwhelming when compared to its peers, and highlights its role as a lower-beta risk and commodity currency.” They nevertheless acknowledge that “the CAD’s strength is notable nonetheless, and threatening to deliver fresh local highs as it retraces its selloff from early September,” while warning that underlying drivers do not fully support the advance.

The lack of fundamental confirmation remains a concern for Scotiabank, which states that “we are somewhat cautious however, given the renewed CAD-negative widening in US-Canada yield spreads, and note that recent CAD strength has not been confirmed by fundamentals.” Its technical assessment is “bearish/neutral,” with the analysts noting that “the latest decline in USD/CAD looks to be struggling to extend much below the mid-1.39s, and the RSI has steadied in the low 30s.” On key levels, the bank says “we continue to look to near-term support in the 1.3900/1.3920 area and see resistance above 1.4000,” while adding that “our FV estimate has climbed over the past few sessions and is currently at 1.4119,” pointing to some divergence between the spot rate and its fair value model.

Technical Analysis: Can USD/CAD break out of its neutral near-term range?

Neither buyers nor sellers appear to have a clear advantage on the daily USD/CAD chart, where the Relative Strength Index (RSI) stands at roughly 49. Trading just above the 100-day simple moving average (SMA), but beneath the 20-day Bollinger middle band, the pair retains a broadly neutral, range-bound near-term outlook. Its price action points to stabilisation following the recent retreat from the upper Bollinger band.

A daily close beyond the initial resistance at the Bollinger middle band, around 1.4065, would pave the way for another test of the upper band near 1.4255. Immediate downside support lies at the 100-day SMA of 1.4045. Should that level give way, the lower Bollinger band area around 1.3881 would come into focus, where buyers could seek to protect the floor of the broader range.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Canadian Dollar: Frequently asked questions

Which major factors influence the Canadian Dollar?

The Canadian Dollar (CAD) responds to several major influences: interest rates determined by the Bank of Canada (BoC), Oil prices, the state of Canada’s economy, inflation and the Trade Balance. Oil is the country’s largest export, while the Trade Balance measures the difference between the value of its exports and imports. Investor sentiment also matters: appetite for riskier assets (risk-on) generally supports the CAD, whereas a preference for safe havens represents a risk-off environment. The strength of the US economy is another important influence on the Canadian Dollar, given that the US is Canada’s largest trading partner.

Why do Bank of Canada decisions matter for the Canadian Dollar?

By determining the interest rate at which banks lend to each other, the Bank of Canada (BoC) shapes borrowing rates across the economy and exerts considerable influence on the Canadian Dollar. Keeping inflation within 1-3% is its primary objective, pursued through increases or reductions in interest rates. Relatively high rates generally support the CAD. Credit conditions can also be managed through quantitative easing or quantitative tightening: easing tends to weigh on the CAD, while tightening tends to support it.

Why is the Canadian Dollar sensitive to Oil prices?

As petroleum is Canada’s largest export, changes in Oil prices typically have an immediate effect on the Canadian Dollar’s value, making Oil a major driver of the currency. Rising Oil prices generally lift the CAD by increasing overall demand for it; falling prices tend to have the reverse effect. Costlier Oil also makes a positive Trade Balance more likely, providing another source of support for the CAD.

What effect can inflation figures have on the Canadian Dollar?

Inflation was traditionally considered harmful to a currency because it erodes the value of money. With cross-border capital controls now more relaxed, however, the relationship has reversed in modern times. Higher inflation typically prompts central banks to raise interest rates, drawing capital from international investors seeking attractive returns. Those inflows boost demand for the domestic currency, which in Canada is the Canadian Dollar.

How do economic releases shape the Canadian Dollar’s value?

The Canadian Dollar can react to macroeconomic releases because they provide a measure of the economy’s health. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys are among the indicators that can steer the CAD. Economic strength supports the currency by drawing in more foreign investment and potentially prompting the Bank of Canada to raise interest rates. Weak economic readings, by contrast, are likely to push the CAD lower.