The USD/CAD pair encountered challenges in building on Friday’s significant intraday rally, which saw a surge of over 100 pips. As of Monday’s Asian session, the pair trades with a mild negative bias around the mid-1.3500s. This downward movement is driven by rebounding Crude Oil prices, although several factors should limit deeper losses.

Oil Price Recovery Supports the Loonie

Crude Oil prices have moved away from their lowest levels since June 2023, thanks to forecasts predicting a potential hurricane approaching the northwestern US Gulf Coast. This region accounts for 60% of US refining capacity, and the weather threat has underpinned the commodity-linked Loonie, putting pressure on the USD/CAD pair. However, Friday’s weaker-than-expected Canadian jobs report has raised expectations for additional interest rate cuts by the Bank of Canada (BoC), limiting gains for the Canadian Dollar.

Mixed US Employment Data and Market Sentiment

On the US side, Friday’s mixed employment report indicated a weakening labor market. Coupled with diminished expectations for larger interest rate cuts by the Federal Reserve (Fed), this has dampened risk appetite, driving safe-haven flows toward the US Dollar. These dynamics may discourage traders from adopting aggressive bearish positions on the USD/CAD pair, making it wise to wait for further selling pressure before expecting a deeper depreciation.

Looking Ahead: Key Influences on USD/CAD

With no major economic data releases expected from the US or Canada on Monday, the broader market sentiment and US bond yields will likely dictate the USD’s direction. Furthermore, Oil price fluctuations will continue to influence the Canadian Dollar, creating potential short-term trading opportunities around the USD/CAD pair.