- USD/CAD finds new selling on Tuesday and falls to almost four-week lows.
- Weakness in oil prices weighs on the CAD and offers support for the pair amid a modest rebound in the USD.
- The mixed fundamental background warrants some caution before entering directional positions.
The pair USD/CAD fails to capitalize on modest gains from the previous day and comes under further selling pressure on Tuesday. The pair continues to drift during the first part of the European session and falls to a nearly four-week low in the last hour, although it has shown some resistance below the round 1.3400 level.
The initial market reaction to further supply cuts by Saudi Arabia and OPEC fades fairly quickly amid the Persistent concern over slowing economic growth and weakening demand for black gold. This, in turn, drags crude oil prices lower for the second day in a row, which, together with the appearance of some buying around the US dollar (USD), helps limit intraday losses in the USD/CAD pair. However, expectations that the Federal Reserve (Fed) will keep interest rates unchanged next week limits the strength of the USD.
In fact, current market prices indicate an increased likelihood that the US central bank will leave interest rates unchanged at the June policy meeting. Against the background of last week’s dovish rhetoric from several FOMC officials, Monday’s disappointing release of the US ISM Services PMI, which fell to 50.3 in May, reaffirmed market expectations for an imminent pause in the Fed rate hike cycle. This is keeping US Treasury yields under pressure, which could dampen bullish expectations and cap the USD/CAD pair.
However, prevailing caution in markets could offer some support to safe-haven USD and the USD/CAD pair. In the absence of any major US economic releases, the mixed fundamental background makes it prudent to wait for selling before positioning for any further depreciation moves. Market participants are now turning their attention to the Canadian PMI release, which, coupled with oil price dynamics, could influence the Canadian Dollar (CAD) and provide some momentum for the pair.
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.
