The Canadian Dollar fell on Friday after weak jobs data for Canada. The country lost 40.8K jobs in July, which was much worse than expected. This contrasted with a gain of 83.1K jobs the previous month and put pressure on the Loonie. However, overall market trends gave it a slight boost later. Next week, we won’t see many major Canadian economic updates, meaning the global trends in the US Dollar will be the main influence. The Bank of Canada is likely to cut interest rates due to slow job growth, and the upcoming US Consumer Price Index (CPI) data might have a big impact on market views about inflation.

USD/CAD Weekly Performance

The USD/CAD held steady around the 1.3750 level, with support at 1.3700. This week, the CAD saw a minimal gain of just 0.26% against the US Dollar, and there wasn’t much upward momentum. The CAD is influenced by several factors, including the Bank of Canada’s interest rates, oil prices, Canada’s economic health, inflation, and trade balances. Market sentiment and the health of the US economy also play significant roles. The Bank of Canada adjusts interest rates to control inflation, which can impact the value of the CAD. Oil prices, a crucial export for Canada, greatly affect the performance of the CAD. When oil prices rise, the CAD usually strengthens, while economic data can shift currency strengths. After the weak jobs report from July 2025, which noted a loss of 40.8K jobs and increased the unemployment rate to 6.4%, there’s a clear downward trend for the Canadian dollar. The market now sees over a 75% probability that the Bank of Canada will cut interest rates in early September, reinforcing the idea that the Loonie may continue to weaken.

Focus on Upcoming US CPI Data

With no significant Canadian economic reports next week, all eyes will turn to the upcoming US Consumer Price Index (CPI) data. The market expects a 3.5% year-over-year increase in Core CPI. Any higher number will likely strengthen the US dollar, making long positions in USD/CAD especially appealing before the report is released. Investors should consider buying call options on USD/CAD with strike prices above the current 1.3750 level. This approach offers upside potential if the US data comes in stronger, possibly driving the pair toward the 1.3850 resistance level. Risk associated with the option’s premium is low due to the nature of the impending data release. As we approach the US inflation report, implied volatility for USD/CAD is expected to rise. We can take advantage of this by exploring long volatility strategies, like a straddle, if we expect significant price movement but aren’t certain of the direction. This would benefit from price spikes, whether upward or downward. We are closely watching oil prices, as West Texas Intermediate (WTI) crude is currently around $82 a barrel. While this price is generally favorable for the Loonie, the negative outlook for Canada’s economy is presently a stronger force. If oil prices fall below $80, it could significantly weaken the Canadian dollar. The current situation is similar to what we saw in late 2023 when a slowing Canadian labor market led to a dovish shift by the Bank of Canada. This historical trend suggests that the current weakness in the Canadian dollar may indicate a longer-term trend rather than a temporary reaction. Thus, we should prepare for continued strength in the USD/CAD pair over the next few weeks. Create your live VT Markets account and start trading now.

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