The USD/CAD pair is reaching seven-month highs, primarily driven by robust US economic data that boosts the Dollar. Currently, the pair is around 1.4126, marking its highest point since April 9 and putting pressure on the Canadian Dollar (CAD). The strength of the US Dollar comes from the ISM Services PMI, which rose to 52.4 in October, indicating growth in the US services sector. In October, US private payrolls increased by 42,000. This improvement counters a drop in September and suggests that the labor market remains strong. This positive trend supports the Federal Reserve’s possible decision to keep interest rates steady in December. The US Dollar Index, which measures the Dollar against six major currencies, stands at 100.30, the highest level since May 29.

Oil Prices And Trade Tensions

Oil prices are also impacting the Canadian Dollar, with West Texas Intermediate crude priced around $60.00 per barrel. Additionally, ongoing trade tensions between the US and Canada affect the CAD’s value. Prime Minister Mark Carney recently apologized to President Donald Trump over an anti-tariff advertisement, which halted trade talks. Trump has yet to agree to continue negotiations, creating uncertainty in bilateral trade relations. A table is included, showing percentage changes in major currencies, highlighting the US Dollar’s strength against the Japanese Yen. Given the strong signals from the US economy, we should expect continued strength in the US Dollar against the Canadian Dollar in the coming weeks. With the USD/CAD rate near 1.4126 breaking through key resistance, we could see it rise further. Using call options on USD/CAD may be a smart strategy to take advantage of this upward trend while managing risks. The rebound in the ISM Services PMI to 52.4 is significant, supporting the belief that the Federal Reserve will not cut interest rates in December. The Prices Paid component rising to 70.0 is particularly noteworthy, reflecting cost pressures not seen consistently since the high-inflation period of 2022-2023. This data strongly suggests the Fed will maintain a hawkish approach, which is positive for the Dollar.

Canadian Dollar Facing Headwinds

Although the ADP payroll figure of 42,000 is not exceptionally strong, it indicates a positive change from the decline in September, highlighting resilience in the labor market. Historically, ADP figures like this can hint at a stronger official Non-Farm Payrolls (NFP) report. We will closely monitor the upcoming NFP data, as a positive surprise could further lift the US Dollar. Conversely, the Canadian Dollar is struggling. WTI crude oil prices have softened to around $60 per barrel, down from an average of over $77 earlier this year, providing little support for Canada’s key export. The unresolved trade tensions with the US add more uncertainty and weakness to the Loonie. This clear gap between a strong US economy and a struggling Canadian economy points to further gains for USD/CAD. The trend appears to lean upward, suggesting that strategies to profit from this momentum should be considered. Buying call options targeting strike prices of 1.4200 or higher seems like a logical move for the next few weeks. Create your live VT Markets account and start trading now.

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