USD/CAD Price Prediction – Canadian Dollar Is Under Pressure As Oil Tests New Lows

Key Insights

• USD/CAD is gaining some ground as oil markets are moving lower.
• If the sell-off continues, USD/CAD will get to the test of the 1.2900 level. 
• Traders should note that tomorrow’s employment reports will have a significant impact on USD/CAD dynamics.

Traders Wait For Employment Data

USD/CAD is gaining some ground today while traders prepare for tomorrow’s employment reports from the U.S. and Canada.

In the U.S., Non Farm Payrolls report is expected to show that the economy added 250,000 jobs in July. Unemployment Rate is expected to remain unchanged at 3.6%.

The market will be extremely sensitive to the Non Farm Payrolls report. A strong report will signal that the Fed can make an aggressive rate hike. Currently, the FedWatch Tool indicates that there is a 59.5% probability of a 50 bps rate hike at the next Fed meeting. The probability of a 50 bps hike has recently increased, putting some pressure on the American currency.

In Canada, Employment Change report is projected to show that the economy added 20,000 jobs in July. Unemployment Rate is projected to increase from 4.9% in June to 5% in July.

Oil Price Dynamics May Impact USD/CAD Ahead Of Employment Reports

Today, the U.S. dollar is losing some ground against a broad basket of currencies as Treasury yields are moving lower. However, the American currency managed to move higher against the Canadian currency as WTI oil found itself under pressure amid reports about spare production capacity in OPEC. According to the reports, this spare production capacity can be used if the world faces supply crunch in winter.

If WTI oil settles below the $90 level, it will gain additional downside momentum and move towards the $85 level, which will be bearish for commodity-related currencies, including Canadian dollar. In case the sell-off in the oil market intensifies, USD/CAD will get to the test of the resistance at 1.2900.

However, traders should keep in mind that tomorrow’s employment data will likely have a bigger impact on USD/CAD compared to the dynamics of the oil market.

For a look at all of today’s economic events, check out our economic calendar.