The Canadian dollar (CAD) is feeling the heat. Over the past two weeks, the loonie has slipped to a four-month low near 1.3940 per USD, posted its biggest weekly loss since February at 1.1%, and only managed a small rebound as exporters locked in favorable rates. Behind the moves is a mix of weak Canadian data, falling oil prices, and a strong U.S. dollar.
September’s S&P Global Manufacturing PMI came in at 47.7, well below the 50 threshold that signals expansion, showing that the slowdown in Canada’s economy is deepening. At the same time, crude oil — one of Canada’s most important exports — has been sliding, undercutting demand for the loonie. Meanwhile, U.S. yields remain firm and American economic data continues to outperform, drawing investors into the greenback and leaving CAD on the defensive.
Why the PMI Matters
The latest PMI reading confirms what markets have been fearing: Canada’s economy is cooling. With new orders shrinking and factory output slowing, confidence in the Canadian outlook has weakened, and the loonie has followed suit.
Oil Prices: A Heavy Weight
Oil and CAD usually move together, and for good reason. Canada earns a large share of its income from energy exports, so when crude prices fall, so does support for the loonie. The recent pullback in oil prices has been a major reason why USD/CAD is struggling to hold below 1.3900.
The U.S. Dollar Advantage
The U.S. dollar is enjoying the opposite story. Stronger-than-expected U.S. data and higher yields have given it fresh momentum, keeping it well bid against most major currencies. For CAD, this means that even on days when the selling slows, the loonie struggles to make any real comeback.
What Traders Are Watching
With USD/CAD trading firmly in the 1.39 range, markets are watching two key levels:
- 1.3875 support – a break below could open space for CAD gains.
- 1.3960 resistance – a breach higher would signal more loonie weakness.
In the meantime, the market tone remains cautious, with oil prices and U.S. data doing most of the heavy lifting.
The Bottom Line
The Canadian dollar is under pressure — and it’s not a single factor driving the weakness. A soft economy, lower oil, and a strong U.S. dollar are all pulling against it. Unless oil prices recover or Canadian data surprises to the upside, the loonie looks set to stay stuck in the defensive zone.
The Canadian dollar is currently trading at 1.39417 CAD against the US Dollar.
