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USD/CAD has fallen to around 1.4295 during Tuesday’s late American session, reflecting a weakening US Dollar against the Canadian Dollar. The decline follows a contraction in the US manufacturing sector, with the ISM Manufacturing PMI dropping to 49.0 from February’s 50.3.
Tariffs from the Trump administration are anticipated to be announced on Wednesday. The uncertainty regarding these tariffs, including their scope and potential market impact, may weaken the US Dollar further.
Impact Of Crude Oil On CAD
Additionally, rising Crude Oil prices could benefit the CAD, given Canada’s status as the largest oil exporter to the US. The value of CAD is influenced by factors like interest rates, oil prices, inflation, and overall economic health. Economic indicators, including GDP and employment rates, play a significant role in shaping the CAD’s trajectory.
The recent move in USD/CAD to near 1.4295 has given traders plenty to think about. The pair’s retreat reflects growing pressure on the US Dollar, stemming from contractionary signs in the US manufacturing sector. That ISM print at 49.0 matters — not because it’s a surprise in isolation, but because it erodes confidence in broader industrial momentum. It’s worth remembering that a reading below 50 tends to reinforce expectations of economic slowdown, and following a prior figure comfortably in expansionary territory, the slip has raised fresh doubts.
Investors, including ourselves, have been watching closely for any new macro narrative capable of shifting directional bias in currency positioning. This ISM data suggests the US may not be in the best position to support additional Dollar strength through industrial activity, especially with inflation expectations and rate trajectories now more uncertain.
But that’s just one piece.
Uncertainty Around US Policy
There’s also the effect of domestic policy speculation — and at this moment, anticipation surrounding trade-related decisions has added a layer of caution. The Trump-era tariffs expected to surface mid-week have kept traders reluctant to take large USD positions ahead of clarity. The greater the uncertainty around policy scope, the harder it is to price risk favourably.
On the other side of the quote, CAD has found some tailwinds. That’s largely due to the recent firm strength in crude prices. Given Canada’s direct reliance on oil exports for national income — especially to the States — any upswing in oil is usually met with a firmer Canadian Dollar, all else equal. We’ve worked through past weeks expecting that a renewed push in Brent or WTI above key resistance levels would bring acceleration in CAD appreciation, and signs now point in that direction more convincingly.
Price action has, notably, respected wider fundamentals. Oil’s recovery, combined with a USD weighed down by both domestic growth uncertainty and trade jitters, continues to tilt flows into the Canadian currency. If crude holds its ground or stretches gains further, we’d expect CAD still to outperform against weaker USD-based pairs.
For positioning, the technical backdrop could well serve as confirmation: USD/CAD currently sitting below short-term moving averages increases the likelihood of further drawdowns, especially if upcoming economic releases from the US fall short again. The pair has shown range sensitivity recently, but momentum has started to align with macro-driven pressure.
With key employment figures and another round of bond auction data due over the next fortnight, the best stance might be reactive — but reactive with leanings. We’re viewing rallies toward old resistance as opportunities, not places of safety. On the other hand, continued oil resilience combined with soft US data might reinforce the idea of trend extension past recent lows.
That said, the CAD benefits here aren’t universal—each leg lower in USD/CAD should be assessed not on momentum alone, but with reference to underlying commodity backing and cross-asset confirmation. Inflation prints from Canada will carry weight if they continue to diverge from US equivalents, especially if they contribute to a sentiment shift in local rate expectations.
In setups moving forward, exaggerated reactions to policy headlines — particularly tariff-related — could offer short-window moves and demand nimble volume management. While fixed-income markets have begun reflecting softer US growth projections, FX hasn’t fully followed suit just yet. That gap presents opportunity for prompt traders looking for alignments across markets.
We’ll remain closely focused on whether short-dollar momentum extends beyond North American pairs, but for now, the Canadian side offers one of the cleaner expressions of policy and commodity asymmetry.
