During Friday’s Asian trading session, the USD/CAD pair held steady above the 1.4200 threshold as traders remained on the sidelines, anticipating the release of the crucial US monthly employment report. Despite this cautious stance, spot prices hovered near their highest levels since April 2025, buoyed by several favorable factors.
Oil prices dipped to their lowest point since late February, primarily due to renewed shipping activities through the Strait of Hormuz, which alleviated worries about a sustained supply crisis. Additionally, the Bank of Canada (BoC) upheld its dovish outlook, prioritizing the economic slow down over inflation concerns, which in turn has been undermining the commodity-linked Canadian dollar (CAD) while supporting the USD/CAD pair alongside a strengthening US dollar (USD).
The recently released ADP report showed a 98,000 rise in private sector payrolls for June, which is a decrease from 122,000 the previous month and below the expected 113,000. Furthermore, the ISM manufacturing PMI fell to 53.3 from 54 in May. Still, this data does little to dampen expectations for a Federal Reserve rate hike. Ongoing geopolitical uncertainties are also providing a boost to the US dollar, reinforcing the USD/CAD pair.
Notably, indirect talks between Iran and the US in Qatar have shown no tangible progress regarding the tensions in the Strait of Hormuz. On a different front, Russia launched missile and drone strikes on Kiev early Thursday, contributing to ongoing geopolitical risks that favor USD bullishness. Furthermore, the differing expectations in central bank policies point toward an upward trend for the USD/CAD pair.
Nevertheless, traders seem a bit hesitant as they await the US Nonfarm Payroll (NFP) report set to be released during North America’s trading hours. This anticipated data will likely influence market sentiment about the Fed’s policy direction and could stir up demand for the US dollar. Moreover, fluctuations in oil prices might continue to create short-term trading opportunities focused on the USD/CAD pair.
