Us Data Reinforces Dollar Demand
US data also supported the Dollar. ADP showed 63K private-sector jobs in February versus 50K expected and 11K previously, while ISM Services PMI rose to 56.1 versus 53.5 expected and 53.8 in January. The Canadian Dollar stayed supported by higher oil prices linked to the Middle East conflict, as Canada is the largest oil exporter to the US. Against other currencies, the CAD traded firmer. The 14-day RSI stayed in the 40.00–60.00 range and below 50. Support is at 1.3632, then 1.3558–1.3559 and 1.3490, while resistance is at 1.3720. Looking back to this time in 2025, we saw the market caught between conflicting forces, holding USD/CAD steady around 1.3645. The US-Iran conflict was creating a tug-of-war, with risk-off demand supporting the US dollar while simultaneously pushing oil prices higher to the benefit of the loonie. This created a period of consolidation that derivative traders found challenging.Shift To Diplomacy And Rate Divergence
The geopolitical landscape has since shifted from active conflict to tense diplomacy, removing the immediate war premium from markets. West Texas Intermediate (WTI) crude oil is now trading at approximately $82 per barrel, which is notably higher than the sub-$80 levels seen during the peak tensions in early 2025. This sustained strength in energy continues to provide an underlying bid for the Canadian dollar. Last year’s economic data showed a surprisingly strong US ISM Services PMI of 56.1, which fueled US dollar strength. Today, we see a more moderated picture, with the February 2026 ISM Services report coming in at a still-expansionary 52.8. This indicates a cooling from the post-pandemic highs but reflects a resilient US economy. The labor market story has also changed significantly from the weak ADP report of only 63,000 jobs in February 2025. The most recent Non-Farm Payrolls report showed a robust gain of 195,000 jobs, reinforcing the Federal Reserve’s cautious stance. This economic divergence has helped push the US Dollar Index (DXY) to around 103.50, a stark contrast to the 99.00 level it flirted with last year. This dynamic suggests traders should consider the widening interest rate differential as a primary driver. The Bank of Canada has begun a modest easing cycle while the Federal Reserve remains on hold, creating a favorable carry for holding US dollars. Therefore, using options to define risk, such as buying call spreads, could allow traders to position for a gradual grind higher in USD/CAD while being protected from sharp reversals caused by oil price volatility. Create your live VT Markets account and start trading now.
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