Canadian Dollar softens as oil prices fall

The Canadian Dollar (CAD) slipped against the US Dollar (USD) on Tuesday as falling oil prices dragged down the commodity-linked currency. Canada's Ivey Purchasing Managers Index (PMI) data was released later in the day, with the Group of Seven nations (G7) agreeing to release 100 million barrels of diesel and crude from emergency reserves.

This move was intended to encourage Middle Eastern crude exports, which had risen above pre-war levels in four of the previous seven days of September. The Bank of Canada (BoC) is expected to hold steady in its rate hike plans, which could weigh on the CAD. Meanwhile, a stronger than expected US Nonfarm Payrolls report and hawkish comments from Fed Chair Jerome Powell have bolstered the USD.

Technical analysis showed that the USD/CAD pair was trading above key moving averages and hovering near the upper Bollinger band, signaling a bullish near-term bias. However, initial support levels were identified at the mid-band and 100-day SMA, with a more distant structural floor at the lower Bollinger band. Overall, the Canadian Dollar was seen as vulnerable to a dovish repricing due to concerns over weak labor demand and excess supply in the economy.