Canadian Dollar moves little despite weaker US Dollar, higher oil prices

USD/CAD remains steady after registering modest gains in the previous day, trading around 1.3830 during Asian hours on Monday. However, the pair could face downside pressure as the commodity-linked Canadian Dollar (CAD) may gain support from rising crude oil prices, given Canada's position as a leading crude exporter.

West Texas Intermediate (WTI) rebounded toward $90.00 per barrel following recent military strikes between the United States (US) and Iran. The conflict escalated over the weekend when the US targeted three Iranian tankers following missile attacks on American warships, prompting Tehran to declare a new restricted zone around the Strait of Hormuz.

Canadian Dollar support fades as data surprises overshadow BoC hawkish tilt

According to TD Securities, the latest labour market data on both sides of the border has shifted the balance of risks against the Canadian Dollar. The bank notes that “the genuine upside surprise in US payrolls and downside surprise in Canada was enough to overwhelm the temporary support from the BoC's hawkish tilt,” leaving the Loonie vulnerable to underperformance even as the central bank maintains a more assertive policy stance.

Labor market data from the US Bureau of Labor Statistics showed Nonfarm Payrolls increasing by 162,000 in August, comfortably beating expectations of 56,000, while the Unemployment Rate held steady at 4.1%. Although the greenback remains soft, its losses may be capped as traders price in higher odds of monetary tightening; the CME FedWatch tool now reflects a 58.3% chance of a 25-basis-point Fed rate increase in September.

Adding to the USD/CAD pair's potential weakness, the US Dollar (USD) is struggling amid broader market uncertainty ahead of crucial US inflation data. Goldman Sachs noted that a benign Consumer Price Index (CPI) reading could keep the Federal Reserve (Fed) from raising rates, even though August's solid labor market figures previously cleared a major hurdle for a potential hike.

Technical Analysis: Bearish bias prevails as USD/CAD holds below EMAs

In the daily chart, USD/CAD trades at 1.3830, keeping a modest bearish bias as spot holds under both the short-term and medium-term trend gauges. Price is capped by the nine- and 50-day Exponential Moving Averages (EMAs), suggesting rallies are being sold while the 14-day Relative Strength Index (RSI) around 43 hints at subdued, still-soft momentum rather than a decisive reversal.

On the topside, immediate resistance is seen at the nine-day EMA near 1.3845, with a stronger barrier at the 50-day EMA around 1.3931, where sellers may look to defend the broader downbeat structure. With no clear technical floors defined by moving averages in the current dataset, any further pullback from these overhead levels would leave USD/CAD vulnerable to probing lower chart lows.