USD/CAD Holds Near 1.3970 Amid Oil Weakness and Mixed US Dollar Sentiment

The USD/CAD currency pair remained rangebound in early Monday trading, hovering around the 1.3965–1.3970 zone, as traders digested conflicting market signals. With softening crude oil prices weighing on the Canadian Dollar (CAD) and renewed USD weakness capping upside momentum, the pair continues to trade within a narrow band established over the past week.

Oil Prices Dip, Putting Pressure on the Canadian Dollar

WTI crude opened the week on a bearish footing, driven by global demand concerns and an oversupplied outlook. This downward pressure on oil, Canada’s top export, has added to the bearish tone for the Loonie, offering mild support to USD/CAD. However, the gains remain limited due to bearish cues surrounding the US Dollar (USD).

US Dollar Struggles Amid Rate Cut Bets and Credit Downgrade

Despite ongoing geopolitical tensions and macroeconomic uncertainty, the US Dollar Index (DXY) failed to build on recent gains. The greenback came under pressure as investors priced in more aggressive Federal Reserve rate cuts in 2025, following recent signals of cooling inflation and a potential economic slowdown. Additionally, a surprise credit rating downgrade for the US government last week continues to dampen sentiment toward the USD, thereby preventing USD/CAD from a strong breakout to the upside.

Trade Deal Optimism Between US and Canada Limits Bullish Momentum

Another factor limiting USD/CAD’s rise is growing optimism surrounding a potential US-Canada trade agreement. Talks between US Vice President JD Vance and Canadian Prime Minister Mark Carney on Sunday hinted at progress toward fair trade negotiations, boosting confidence in the Canadian economic outlook. This optimism is helping to stabilize the CAD despite weaker commodity prices.

No Major Data Ahead, Fed Speeches and Oil Prices in Focus

Looking ahead, Monday’s economic calendar is relatively light, with no high-impact releases expected from either the US or Canada. However, upcoming speeches from key Federal Reserve officials could provide clues about the central bank’s monetary policy trajectory and influence USD positioning.

In the meantime, oil price trends and investor risk appetite will continue to play a pivotal role in shaping short-term USD/CAD movement.

🔑 Key Takeaways:

USD/CAD trades near 1.3970 amid mixed market drivers.
Falling crude oil prices weaken CAD but support for the pair remains capped by soft USD sentiment.
Fed rate cut expectations and a US credit downgrade weigh on the Dollar.
Positive signals from US-Canada trade discussions lend support to CAD.
Traders eye Fed commentary and oil market developments for near-term direction.