- USD/CAD struggles to lure buyers, though a combination of factors helps limit the downside.
- Bearish Crude Oil prices undermine the Loonie and support spot prices amid a modest USD uptick.
- Bets for aggressive Fed rate cuts should cap the USD and cap any recovery for the currency pair.
The USD/CAD pair enters a bearish consolidation phase during the Asian session on Thursday and oscillates in a narrow band below the 1.3800 mark, near its lowest level since October 2025 touched the previous day.
The Canadian Dollar (CAD) continues to be underpinned by the Liberal Party’s victory in the Canadian federal election, which strengthens the incumbent Prime Minister Mark Carney’s position in trade negotiations with the US. However, the recent slump in Crude Oil prices to a nearly three-week low offset the supporting factors and keeps a lid on any meaningful upside for the commodity-linked Loonie. This, along with a modest US Dollar (USD) uptick, acts as a tailwind for the USD/CAD pair.
According to the advance estimates, the US economy unexpectedly contracted during the first quarter of 2025. This comes on top of persistent worries about US President Donald Trump’s erratic trade policies and adds to concerns about a looming global recession, which is expected to dent fuel demand. This, along with expectations that several OPEC+ members will suggest an acceleration of output hikes for a second consecutive month in June, act as a headwind for the black liquid.
Meanwhile, the dismal US GDP print, along with signs of easing inflationary pressures, reaffirms market bets for the resumption of the Federal Reserve’s (Fed) rate-cutting cycle in June. Moreover, traders are currently pricing in the possibility that the US central bank will lower borrowing costs by a full percentage point by the year-end. This might hold back the USD bulls from placing aggressive bets and suggests that the path of least resistance for the USD/CAD pair remains to the downside.
The negative outlook is reinforced by the overnight breakdown through the lower boundary of a short-term trading range held over the past week or so. Moreover, oscillators on the daily chart are holding deep in negative territory and favor bearish traders. Hence, any attempted USD/CAD move-up is more likely to get sold into. Traders now look to the key US macro data scheduled at the beginning of a new month, starting with the ISM Manufacturing PMI on Thursday, for a fresh impetus.
