USD/CAD remains above 1.3850 as Oil prices decline, with focus on upcoming US NFP

USD/CAD Maintains Upward Momentum Ahead of Key Economic Reports

The USD/CAD currency pair has extended its upward trend since the start of January, hovering near 1.3870 during Friday’s Asian session. Market participants are closely monitoring the upcoming US Nonfarm Payrolls (NFP) data, which is anticipated to shed light on the state of the US labor market and influence the Federal Reserve’s future policy direction. Meanwhile, Canadian employment figures and the December unemployment rate are also in focus.

The Canadian Dollar (CAD), which is sensitive to commodity prices, has faced headwinds as Oil prices decline, supporting the strength of USD/CAD. Expectations of increased Venezuelan Oil shipments to the United States could dampen demand for Canadian heavy crude, intensifying competition and potentially reducing Canada’s export volumes and profit margins. Since Oil plays a pivotal role in Canada’s trade balance, a drop in crude demand may restrict the CAD’s ability to appreciate against the US Dollar (USD).

According to Reuters, major energy companies such as Chevron, along with global trading firms Vitol and Trafigura, are actively seeking US government contracts to export Venezuelan crude. These firms are competing to market up to 50 million barrels from PDVSA’s stockpiles as negotiations over Venezuelan Oil exports continue.

In an interview with CNBC on Thursday, US Treasury Secretary Scott Bessent advocated for continued interest rate reductions by the Federal Reserve, suggesting that lower rates are crucial for further economic expansion and urging the Fed not to postpone action. The CME Group’s FedWatch tool indicates that futures traders currently assign an 86.2% chance that the central bank will leave interest rates unchanged at its January 27–28 meeting.