USD/CAD is trending upward, reaching about 1.3860 during Asian trading hours on Thursday. This rise is supported by the Canadian Dollar’s struggles, as US President Donald Trump signals potential increases in Venezuelan oil imports, which might reduce demand for Canadian oil. Prime Minister Mark Carney believes Canadian crude oil can still compete, despite the threat from Venezuela. He plans to visit China in January to explore new avenues for Canadian exports due to uncertainties in US trade policy.

Canada’s Economic Indicators

In December 2025, Canada’s Ivey PMI climbed to 51.9, surpassing expectations and indicating economic growth after a contraction in November. Meanwhile, forecasts for US Nonfarm Payroll growth fell from 64,000 in November to an expected 55,000 in December. The US Services PMI increased to 54.4 in December from 52.6 in November, according to the Institute for Supply Management. The ADP Employment Change in the US showed an increase of 41,000 jobs in December, slightly below market predictions. The value of the Canadian Dollar is affected by various factors, such as interest rates from the Bank of Canada, oil prices, and other economic indicators. Generally, high oil prices strengthen the CAD, while inflation data often leads to higher interest rates, attracting investments. Key economic figures like GDP and employment statistics also significantly influence CAD value.

Potential Global Market Impacts

The ongoing rise in USD/CAD above 1.3850 is linked to potential changes in the global oil market. The possibility of Venezuelan oil re-entering the mix poses a challenge for the Canadian dollar, threatening the already precarious price of WTI crude, which is struggling to stay above $75 a barrel. Historically, new sources of supply can widen the gap in Canadian crude prices, negatively affecting the currency. However, we must consider the surprising strength of Canada’s economy, as shown by the Ivey PMI data from December 2025, which indicates a return to economic growth. This suggests resilience in the Canadian dollar, complicating a solely negative outlook. Strong domestic data may also lead the Bank of Canada to refrain from signaling upcoming rate cuts, providing some stability for the currency. The main focus this week is tomorrow’s US Nonfarm Payrolls report, which will significantly impact the US dollar’s direction. The ADP report from December 2025 was below expectations, and another weak labor report could heighten bets on a Federal Reserve rate cut by mid-2026, a scenario that future markets already estimate at a 60% chance. This context makes the US dollar’s current strength seem tenuous. Given this mix of data, there’s a compelling reason to use options to trade the expected rise in volatility. One-week implied volatility on USD/CAD options has surged to over 9.5%, rising from a December 2025 average of 7.2%, indicating that the market anticipates a significant movement. Buying a straddle before the jobs report could be a wise strategy to benefit from a sharp price change, regardless of which direction it takes. We’re also monitoring key technical levels, as the pair tests resistance that held throughout much of the fourth quarter of 2025. A strong US jobs report could push the pair past the 1.3900 psychological barrier, leading to further gains. Conversely, a weak report might provoke a rapid retreat back toward the 1.3700 support zone. Create your live VT Markets account and start trading now.

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