The Canadian dollar has experienced a period of strengthening, driven by a combination of domestic economic factors, shifts in monetary policy expectations, and external pressures on the US dollar. Resilient labour market data, firm commodity prices, and relative attractiveness of Canadian real returns have all contributed to the currency’s positive performance.
- The Canadian dollar firmed toward 1.35 per US dollar, nearing 16-month highs.
- January labour data showed the unemployment rate at 6.5%, the lowest since September 2024.
- Full-time employment and wage growth near 3.3% diminished the case for near-term Bank of Canada easing.
- Broad US dollar softness followed weaker US labour indicators and reports of Chinese regulators curbing Treasury exposure.
- Oil prices increased, further supporting the currency.
- USD/CAD price tests 1.3600 barrier near nine-day EMA
- USD/CAD remains within a descending channel pattern, suggesting a persistent bearish bias.
These dynamics suggest a favorable outlook for the Canadian dollar in the short term. Strong internal economic performance is attracting investment, while external factors are creating opportunities for further appreciation. However, technical analysis indicates a bearish trend for the USD/CAD, which needs to be factored into any forecast.