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05/08/26
15
USD/CAD Holds Near One-Week High as Oil Weakness Supports Gains
USD/CAD extended its advance for a fourth consecutive session and held near 1.4070, close to a one-week high reached in the previous session. Even so, the pair has struggled to build sustained upward momentum as opposing forces continue to shape trade, leaving room for caution after its rebound from levels below 1.4000, the weakest area since mid-June.
A key factor behind the latest move has been the drop in crude oil prices, which has weighed on the Canadian dollar. Expectations that the United States, Iran, and Oman may be nearing an agreement to reopen the Strait of Hormuz have helped push oil to a nearly four-week low. For Canada, a major energy exporter, softer oil prices tend to pressure the domestic currency and can lend support to USD/CAD.
At the same time, easing geopolitical tensions have reduced demand for the US dollar’s safe-haven appeal, limiting the pair’s upside. Signs of progress toward a diplomatic resolution in the Middle East have encouraged some risk-taking, while also reducing the urgency for defensive positioning in the dollar.
Still, the prospect of at least one Federal Reserve rate increase before the end of this year continues to underpin the US currency. Traders remain attentive to signs that the US labor market is stabilizing and that inflation risks have not fully faded. Recent comments from Kansas City Fed President Jeff Schmid and Philadelphia Fed President Anna Paulson have also reinforced the case for tighter policy if price pressures persist.
Market participants are now looking to Wednesday’s US data, including the ADP employment report and the ISM Services PMI, for fresh clues on the economy’s momentum. In addition, speeches from Federal Open Market Committee officials and any new developments in the Middle East could influence near-term sentiment. The broader focus, however, remains on Friday’s monthly jobs reports from the US and Canada, which may provide the clearest signal for the pair’s next major move.
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