USD/CAD Stays High as Strong Jobs Data Supports Both Sides

Quick Take

USD/CAD is still trading near the upper side of its recent range, but the move is not a clean U.S. dollar breakout. The dollar has strong support after U.S. nonfarm payrolls rose by 172,000 in May, pushing markets to price a more than 70% chance of a Fed hike by December. At the same time, the Canadian dollar’s decline was limited because Canada also delivered a much stronger labour report than expected.

What Is Supporting USD/CAD

The first support comes from the U.S. side. Reuters reported on 8 June that the dollar was near a two-month high after the stronger-than-expected jobs report increased expectations that the Federal Reserve may need to raise rates again this year. For USD/CAD, this matters because a stronger U.S. labour market makes it harder for traders to price an early Fed easing cycle.

The Fed story is now more supportive for the dollar than it was a week earlier. Reuters said markets were pricing a more than 70% chance of a December Fed hike, up sharply from 45% the previous week. That kind of repricing keeps USD supported even when other currencies have their own positive domestic data.

Why CAD Did Not Fall More

The Canadian dollar also had a reason to resist deeper losses. Canada added 87,800 jobs in May, far above the 10,000 gain economists had expected, while the unemployment rate fell to 6.6% from an expected 6.9%. Reuters reported that the loonie weakened only 0.1% to 1.3920 per U.S. dollar after both U.S. and Canadian jobs data came in strong.

That is important because the Canadian jobs report reduced the risk of a clearly weak CAD story. Investors raised pricing for Bank of Canada rate hikes to about 40 basis points by year-end, up from 34 basis points before the data. This gives the Canadian dollar some policy support, even though economists still expect the BoC to keep rates unchanged at the next decision.

Oil Adds Another Layer of CAD Support

Oil is also helping the Canadian dollar avoid a deeper selloff. Reuters reported that Brent crude rose $3.20, or 3.39%, to $96.24 a barrel, while U.S. crude rose 3.17% to $93.41 after renewed Middle East tensions and explosions in Iran revived supply concerns.

For USD/CAD, higher oil matters because Canada is a major energy exporter. A stronger oil market usually improves the commodity backdrop for CAD. However, oil strength is not purely positive for the loonie because it also keeps global inflation pressure high and supports the broader case for tighter Fed policy. That is why oil helps CAD, but does not automatically push USD/CAD sharply lower.

Why the Pair Still Looks Rangebound

The key point is that both sides of the pair have support. The U.S. dollar has the stronger Fed repricing story, while the Canadian dollar has stronger domestic jobs data and oil support. This makes USD/CAD more likely to trade in a choppy high range than move cleanly in one direction.

The Bank of Canada also remains a stabilising factor rather than a strong CAD catalyst. In April, the BoC held its key rate at 2.25% and said policy changes would likely be small if its forecasts held. Governor Tiff Macklem also warned that if oil prices stayed high and fed into broader inflation, the Bank might need to respond with consecutive rate increases.

Near-Term View

My near-term view is that USD/CAD may stay supported near the upper part of its recent range while the U.S. dollar benefits from Fed hike expectations. However, the pair may struggle to break much higher if Canadian jobs data continues to hold up and oil remains firm.

A cleaner upside move would likely need renewed U.S. dollar strength together with weaker Canadian data or lower oil prices. A move lower would likely need the Fed rate-hike story to cool while Canadian data and oil prices remain supportive.

Conclusion

The main point is simple: USD/CAD is high, but not one-sided. Strong U.S. jobs data supports the dollar, while Canada’s strong labour market and higher oil prices help the loonie resist deeper losses. For now, the pair looks more like a high-level range trade than a clean bullish breakout.