USD/CAD Holds Firm as Weak Canada Jobs Offset Oil Support

Quick Take

USD/CAD is not falling cleanly even though oil and commodity prices are helping Canada’s market tone. The Canadian dollar recently traded around the 1.36 area against the U.S. dollar, but the pair has struggled to move decisively lower because Canada’s labour data has weakened and the Bank of Canada is still giving the market a cautious policy message.

What Is Supporting the Canadian Dollar

The first support for CAD still comes from commodities. Canada’s equity market recently benefited from gains in materials, gold, and energy stocks as oil and metal prices rose on renewed Middle East tension. For a commodity-linked currency like the Canadian dollar, that kind of backdrop normally provides some support.

Oil also remains a direct part of the CAD story. Canada is a major energy exporter, so higher crude prices can improve the terms-of-trade narrative for the loonie. That is why USD/CAD has not been able to break strongly higher even when the U.S. dollar remains supported.

Why CAD Support Is Not Enough

The problem is that Canada’s domestic data is no longer clean. Canada’s unemployment rate rose to 6.9% in April, the highest in six months, while the economy lost 17,700 jobs and full-time employment fell by 46,700. That makes it harder for traders to buy CAD aggressively just because oil prices are higher.

The services side is also not fully healthy. Canada’s services PMI improved to 49.2 in April from 47.2 in March, but it remained below the 50 line, meaning the sector was still in contraction. At the same time, selling prices rose at the fastest pace in two years, showing that companies are still dealing with cost pressure.

The Bank of Canada Is Providing Stability, Not a Strong CAD Catalyst

The Bank of Canada held its target for the overnight rate at 2.25% on 29 April, with the Bank Rate at 2.5% and the deposit rate at 2.20%. The Bank also noted that the Middle East conflict and U.S. trade policy remain major sources of uncertainty.

This is important for USD/CAD because the BoC is not sending a strong tightening signal. Its April outlook says higher oil prices are adding to inflation in 2026, but it also expects inflation to ease back toward the 2% target in 2027. That gives the loonie a stable policy backdrop, but not a powerful reason for USD/CAD to fall sharply.

Why the Dollar Can Still Push Back

The U.S. dollar still has support from the Fed side. The Federal Reserve kept rates unchanged on 29 April and said inflation remains elevated, partly because of higher global energy prices. That makes it difficult for the market to price a quick Fed easing cycle.

U.S. inflation risk has also not gone away. Reuters reported that April CPI was expected to show a 0.6% monthly increase and a 3.7% annual rise, driven partly by elevated energy and food prices. If inflation stays firm, the dollar may remain supported even when risk sentiment improves.

Near-Term View

My near-term view is that USD/CAD may stay rangebound with a slight upward bias unless Canada’s data improves or oil prices rise strongly enough to dominate the FX story. Higher oil prices help CAD, but weaker Canadian jobs data and a cautious BoC limit the loonie’s strength.

If U.S. inflation stays firm and the Fed continues to hold rates high, USD/CAD dips may attract buyers. If oil rises further and Canadian data stabilizes, the pair could move lower, but that move may still be gradual rather than clean.

Conclusion

The main point is simple: CAD has commodity support, but not enough domestic strength. Oil is helping the Canadian dollar, yet weak employment data and a cautious Bank of Canada are stopping USD/CAD from turning into a smooth downtrend.