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- USD/CAD is pressured by some follow-through USD selling, though it lacks bearish conviction.
- Rising Fed rate cut bets and a positive risk tone weigh on the USD for the second straight day.
- Weaker Crude Oil prices offset hawkish BoC, capping the CAD and supporting the currency pair.
The USD/CAD pair edges lower on Tuesday and looks to extend the previous day’s late retracement slide from the 1.3815 area, or its highest level since December 11. Spot prices, however, manage to hold above mid-1.3700s through the first half of the European session and currently trade nearly unchanged for the day amid mixed cues.
The US Dollar (USD) extends the overnight pullback from a nearly four-week high amid rising bets for more interest rate cuts by the US Federal Reserve (Fed), bolstered by Monday’s mixed US PMIs for December. Apart from this, concerns about the central bank independence under US President Donald Trump’s administration, along with a generally positive risk tone, further weigh on the safe-haven buck. This, in turn, is seen as a key factor exerting some pressure on the USD/CAD pair.
Apart from this, the Bank of Canada’s (BoC) hawkish signal seems to offer some support to the Canadian Dollar (CAD), which contributes to the offered tone surrounding the currency pair. Meanwhile, expectations that the US control of Venezuela’s oil would likely increase global supplies offset geopolitical tensions and fail to assist Crude Oil prices to capitalize on Monday’s recovery from a two-week low. This undermines the commodity-linked Loonie and supports the USD/CAD pair.
Traders might also refrain from placing aggressive directional bets and opt to wait for this week’s important US macro releases, including the closely-watched Nonfarm Payrolls (NFP) report on Friday. The crucial data could offer more cues about the Fed’s rate-cut path and influence the USD price dynamics. Apart from this, the monthly Canadian employment details, also due on Friday, should provide some meaningful impetus to the CAD and determine the USD/CAD pair’s near-term trajectory.
