International oil prices have recently come under downward pressure, with WTI crude oil trading around $56 per barrel and continuing its downward trend. Part of the reason for the weakening oil prices is that market expectations of large quantities of Venezuelan crude oil being shipped to the United States have exacerbated concerns about a global supply glut.

US President Trump announced that Venezuela will deliver 30 million to 50 million barrels of crude oil to the United States, a move seen as potentially increasing supply and putting downward pressure on oil prices.

As a typical commodity currency, the Canadian dollar tends to fluctuate with changes in oil prices—when oil prices weaken, the Canadian dollar comes under pressure and falls, thus pushing up the USD/CAD exchange rate.

Despite a slight weakening in the previous trading session, the dollar's overall tone remains solid. Market participants are currently awaiting US ISM Services PMI and JOLTs job openings data, which could influence market expectations regarding the Federal Reserve's future policy path and thus provide new short-term directional guidance for the dollar's movement.

On the other hand, opinions within the Federal Reserve remain divided on the path of interest rate cuts. Some officials are calling for aggressive rate cuts to support the economy, while others emphasize the need for fine-tuning policy based on the latest economic data.

Overall, the interest rate futures market still largely expects the Fed to keep rates unchanged at its January 27-28 meeting. This means the market has not yet fully priced in a rate cut. According to the CME FedWatch tool, the probability of the Fed keeping rates unchanged remains above 80%, which has supported the recent strength of the US dollar to some extent.

From a daily chart perspective, the USD/CAD price structure has shown a steady upward trend recently. After several days of continuous gains, the exchange rate has held steady near the key psychological level of 1.3800, indicating that the bulls continue to dominate.

Short-term moving averages (such as 5-day and 10-day) are arranged in an upward trend, and prices mostly trade above these moving averages, indicating that the technical signals favor a continuation of the upward trend.

Although the Relative Strength Index (RSI) is in the upper range, there is no clear overbought signal, indicating that the upward momentum has not yet fully exhausted. If the price can hold firmly above 1.3800, the possibility of attacking the resistance level of 1.3850 or even higher will increase.

However, if a short-term pullback occurs, the 1.3750 area will become an important support level.


Editor's Note:

Overall, the recent upward trend in USD/CAD is mainly driven by the combined effects of pressure on oil prices leading to a weaker Canadian dollar and the relative strength of the US dollar amid global uncertainty.

Because the Canadian economy is sensitive to oil prices, and oil price fluctuations significantly impact the Canadian dollar, this week's data and geopolitical supply and demand changes remain key factors for market judgment. If oil prices stop falling and rebound or the US dollar weakens significantly, the upward momentum of USD/CAD may slow down; conversely, it may continue to test higher levels.