The Canadian dollar came under renewed pressure as declining oil prices reinforced demand for the U.S. dollar, pushing the USD/CAD pair toward further gains. Crude prices extended their slide to around $56 per barrel, driven by mounting concerns over a potential global supply surplus.
The latest downturn in oil followed comments from U.S. President Donald Trump indicating that Venezuela would supply between 30 million and 50 million barrels of crude oil to the United States. The prospect of additional supply has intensified fears of oversupply in the global market, exerting further downward pressure on oil prices. Given Canada’s status as a major energy exporter, weakness in crude prices has translated into a softer Canadian dollar, supporting upward movement in USD/CAD.
Although the U.S. dollar experienced a modest pullback in the previous trading session, its broader strength has remained intact. Investor attention is now focused on upcoming U.S. economic indicators, including the ISM Services Purchasing Managers’ Index and the JOLTs job openings report. These releases are expected to offer fresh insight into the health of the U.S. economy and the Federal Reserve’s policy outlook, with potential short-term implications for the dollar.
Within the Federal Reserve, policymakers continue to express differing views on the future path of interest rates. While some officials have signaled support for aggressive rate cuts to bolster growth, others favor a more cautious approach tied to incoming economic data. Despite these divisions, interest rate futures suggest a strong consensus that policy will remain unchanged at the January 27–28 meeting. Data from the CME FedWatch Tool indicate more than an 80% probability of a rate hold, a factor underpinning ongoing U.S. dollar strength.
From a technical perspective, USD/CAD has maintained a clear upward trend. After several consecutive sessions of gains, the pair has consolidated near the key psychological level of 1.3800, reflecting sustained bullish sentiment. Short-term moving averages, including the five-day and ten-day, continue to slope higher, with prices trading above both indicators. While the Relative Strength Index is elevated, it has not yet signaled overbought conditions, suggesting upside momentum remains intact.
As long as the exchange rate holds above the 1.3800 threshold, further advances toward resistance near 1.3850 remain possible. Any near-term pullbacks are expected to encounter support around the 1.3750 area.
Overall, the strength in USD/CAD reflects the combined impact of falling oil prices on the Canadian dollar and the resilience of the U.S. dollar amid global uncertainty. Near-term direction will likely hinge on developments in energy markets and upcoming U.S. economic data, with any stabilization in oil prices or a marked weakening of the U.S. dollar potentially tempering the pair’s upward momentum.
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