- USD/CAD regains some positive traction on Wednesday, although it lacks bullish conviction.
- Falling oil prices weigh on the CAD and support the pair amid modest USD strength.
- Traders seem reluctant and prefer to wait for the release of the FOMC minutes.
He USD/CAD attracts some buying at the start of the European session on Wednesday and moves away from the weekly low, around the 1.3200 level touched the day before. The pair is currently hovering around the 1.3240-1.3245 zone, up nearly 0.10% on the day, and finding support from a combination of factors.
The fear that the slowdown in the world economy will affect the demand for fuel eclipses expectations of a tighter offer due to the production cuts announced by the main exporters -Saudi Arabia and Russia- and acts as a headwind for crude oil prices. On top of this, last week’s Canadian data, which showed consumer inflation slowed in May to its lowest level in almost two years, is weighing on the commodity price-linked CAD. This, coupled with modest US dollar (USD) strength, helps the USD/CAD pair gain some positive traction.
The Fed’s Hardline Outlook (Fed), which suggest that borrowing costs they might have to go up as much as 50 basis points by the end of this year, and rising expectations of a 25 basis point rate hike at the July FOMC meeting continue to support a rise in US Treasuries. This, in turn, supports the USD, although the upside remains constrained by uncertainty about the Fed’s rate hike path. Indeed, weaker US macroeconomic data has recently raised questions about room for maneuver available to the Fed to continue its tightening cycle.
Hence, the markets are still pending the publication of the minutes of the June meeting of the Federal Open Market Committee (FOMC). Investors will look for further signals on the Fed’s outlook, which should give the dollar a significant boost ahead of Friday’s monthly US employment report (NFP) and produce short-term opportunities around the USD/CAD pair. . On Wednesday, traders will continue pay attention to the meeting of oil industry executives with OPEC energy ministers and their allies.
The fundamental background mentioned seems to lean slightly in favor of the bullsalthough it will be prudent to wait for strong continuation buying before positioning for a resumption of the recent rally from the yearly low hit last week.
USD/CAD technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
