• USD/CAD remains close to a 14-month high amid a combination of supporting factors.
• Oil prices hit a four-month low amid easing supply concerns, undermining the Loonie.
• The BoC-Fed policy divergence favors bulls amid a firmer USD and ahead of the US NFP.

The USD/CAD pair consolidates above the 1.4200 mark during the Asian session on Thursday as traders opt to wait for the release of the crucial US monthly employment details before positioning for any further gains. Spot prices, however, remain close to the highest level since April 2025 amid a combination of supporting factors.

Crude Oil prices have dropped to a fresh low since late February as the resumption of shipping traffic through the Strait of Hormuz eased fears of a prolonged supply shock. Adding to this, the Bank of Canada (BoC) maintained a dovish stance as policymakers are prioritizing a sluggish economy over inflation threats. This, in turn, continues to undermine the commodity-linked Canadian Dollar (CAD), which, along with a bullish US Dollar (USD), continues to act as a tailwind for the USD/CAD pair.

The US ADP report showed on Wednesday that private-sector employment increased by 98K in June, down from the previous month’s unrevised 122K and missing estimates for a reading of 113K. Adding to this, the ISM Manufacturing PMI eased to 53.3 in June from 54 in the previous month. The data, however, does little to temper Federal Reserve (Fed) rate-hike bets. Moreover, lingering geopolitical risks continue to act as a tailwind for the USD, which, in turn, supports the USD/CAD pair.

In fact, Iran and the US concluded ​a round of indirect talks in Qatar with no sign that they have made headway toward a lasting peace agreement amid tensions over the critical Strait of Hormuz. Separately, Russia launched a barrage of missiles and drones on Ukraine’s capital, Kyiv, early this Thursday. This keeps geopolitical risks in play and favors the USD bulls. Apart from this, the divergent BoC-Fed policy expectations suggest that the path of least resistance for the USD/CAD pair is to the upside.

Traders, however, seem hesitant ahead of the US Nonfarm Payrolls (NFP) report, due later during the North American session. The closely-watched data will play a key role in influencing market expectations about the Fed’s policy path and drive the USD demand. Furthermore, Oil price dynamics might continue to produce some short-term trading opportunities around the USD/CAD pair.

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