- USD/CAD struggles to register any meaningful recovery amid a combination of factors.
- An uptick in Oil prices underpins the Loonie and overshadows modest USD strength.
- Hope for a US-Canada trade deal further benefits the CAD and weighs on the major.
The USD/CAD pair extends its bearish consolidative price action heading into the European session on Thursday and currently trades around the 1.3670-1.3665 area, just above the lowest level since October 2024 touched the previous day. Meanwhile, the fundamental backdrop seems tilted in favor of bearish traders and suggests that the path of least resistance for spot prices remains to the downside.
Reports that a trade deal between the US and Canada could happen before the G7 Summit on June 15, along with the Bank of Canada’s (BoC) decision to keep interest rates steady on Wednesday, might continue to underpin the Canadian Dollar (CAD). Adding to this, a modest uptick in Crude Oil prices could benefit the commodity-linked Loonie and validate the negative outlook for the USD/CAD pair amid the underlying bearish sentiment surrounding the US Dollar (USD).
Traders lifted bets that the Federal Reserve (Fed) will cut interest rates at the September policy meeting following Wednesday’s weaker-than-expected US economic releases. This led to the overnight slide in the rate-sensitive two-year and the benchmark 10-year US Treasury yields to the lowest level since May 9. Furthermore, concerns about the worsening US fiscal conditions and persistent trade-related uncertainties should contribute to capping any meaningful USD appreciation.
The aforementioned negative factors suggest that any attempted recovery could be seen as a selling opportunity and remain capped. Traders now look to the release of US Weekly Initial Jobless Claims, which, along with speeches from influential FOMC members, will drive the USD demand. Apart from this, Oil price dynamics should produce short-term opportunities around the USD/CAD pair in the run-up to the crucial monthly employment details from the US and Canada.
