Canadian Dollar declines ahead of US JOLTS Job Openings data
- USD/CAD strengthens to around 1.4050 in Tuesday’s early European session.
- Trump said talks with Iran are underway, while Tehran denies US negotiations.
- Traders brace for the US and Canadian employment data, which are due later on Friday.
The USD/CAD pair gains ground to near 1.4050 during the early European session on Tuesday. Traders continue to weigh the developments surrounding US-Iran talks. The US JOLTS Job Openings data is due later on Tuesday. On Friday, the US and Canadian July employment reports will be the highlights.
Bloomberg reported on Monday that US President Donald Trump claimed talks with Iran are ongoing, saying this is Tehran’s “last chance to sign a good document”. Trump added that he expected negotiations to begin in the next day or two to reopen the Strait of Hormuz and create a pathway for Iran to address the US’s concerns about its nuclear programme.
Nonetheless, Tehran denied that talks with the US were taking place. Iran’s Foreign Ministry spokesperson, Esmaeil Baghaei, stated that the country’s current focus was on negotiations with Oman over the Strait of Hormuz.
Any signs of renewed tensions between the US and Iran could boost crude oil prices and support the commodity-linked Canadian Dollar (CAD) against the US Dollar (USD). It is worth noting that Canada is a major oil-exporting country, and high crude oil prices generally have a positive impact on the Loonie.
The US July employment data on Friday will be closely watched as it might offer more clarity on the Federal Reserve’s (Fed) next policy move. A stronger-than-expected outcome would reinforce higher-for-longer US rate bets and underpin the Greenback. Markets have priced in nearly a 64.7% odds of a rate hike in September, down from about 77% before the July Fed meeting, according to the CME FedWatch tool.
Canadian Dollar gains capped as USD/CAD stalls near 1.40
Analysts at Scotiabank note that the Canadian Dollar has drawn support from a "generally softer USD undertone" that has developed over the past couple of sessions. However, they highlight that the CAD is "having some trouble progressing through the 1.40 area" in USD/CAD, underscoring that recent gains remain constrained despite the more favorable US Dollar backdrop.
Technical Analysis: USD/CAD keeps a bullish vibe in the near term
In the daily chart, USD/CAD holds above the 100-day simple moving average (SMA), keeping the broader uptrend supported despite a moderation in momentum. Price sits just under the Bollinger Bands’ 20-period SMA, while the Relative Strength Index (14) at 45.9 has eased back toward neutral territory, suggesting the recent overbought phase has dissipated without triggering a deeper correction so far.
On the topside, initial resistance appears at the Bollinger middle band near 1.4085, with a stronger cap at the Bollinger upper band around 1.4182. On the downside, immediate support is aligned with the lower Bollinger band at 1.3985, ahead of the more strategic floor at the 100-day SMA around 1.3907, where buyers would be expected to defend the prevailing bullish structure.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
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