- USD/CAD attracts sellers for the fourth straight day and seems vulnerable to slide further.
- An uptick in Crude Oil prices and reduced bets for a BoC rate cut underpin the Loonie.
- US fiscal concerns and dovish Fed expectations weigh on the USD and the currency pair.
The USD/CAD pair struggles to capitalize on the overnight bounce from the 1.3815-1.3810 region, or a two-week low, and trades with a negative bias for the fourth consecutive day on Thursday. Spot prices trade around mid-1.3800s during the Asian session and seem vulnerable to extend the weekly downtrend.
Crude Oil prices regain positive traction following the previous day’s pullback from a nearly one-month top on the back of the uncertainty over US-Iran nuclear talks. Adding to this, hotter-than-expected Canadian core inflation figures released on Tuesday dampened hopes for a Bank of Canada (BoC) rate cut in June, which, in turn, is seen underpinning the commodity-linked Loonie. This, along with the prevalent US Dollar (USD) selling bias, exerts some downward pressure on the USD/CAD pair.
Investors remain on edge following the US sovereign credit rating downgrade by Moody’s and growing worries about rising US deficit in the wake of US President Donald Trump’s sweeping tax bill. Moreover, renewed US-China trade tensions and bets that the Federal Reserve (Fed) will lower borrowing costs in 2025 keep the USD depressed near a two-week low. This further contributes to the offered tone surrounding the USD/CAD pair and validates the near-term negative outlook.
Even from a technical perspective, the recent failure near the very important 200-day Simple Moving Average (SMA) and a subsequent breakdown below the 1.3900 mark, or the lower boundary of a short-term trading range, favors bearish traders. This, in turn, suggests that the path of least resistance for the USD/CAD pair remains to the downside. Traders now look forward to the release of flash global PMIs and the US macro data for short-term opportunities.
