- USD/CAD falls to its lowest level since June 10 amid prevailing USD selling bias.
- Diminishing odds of a more aggressive rate hike by the Fed continue to weigh on the dollar.
- Weakening oil prices could undermine the loonie and help limit deeper losses for the pair.
The pair USD/CAD reverses a modest intraday rally to the 1.2820 area and turns lower for the fourth day in a row on Monday. This also marks the fifth day of a negative move in the previous six and drags the pair to its lowest level since June 10, around the 1.2765 region during the mid-European session.
The US dollar extends its decline after the FOMC and the selling does not stop on the first day of a new week, which, in turn, puts downward pressure on the USD/CAD pair. It is worth remembering that last week the Fed hinted that it could slow down the pace of the rate hike campaign at some point. Furthermore, last Thursday’s disappointing release of the US GDP flash report fueled speculation that the Fed would not raise interest rates as aggressively as had been estimated. This is seen as a key factor that continues to weigh on the USD.
That said, a combination of factors, for now, seems to have eased the bearish pressure surrounding the USD/CAD pair and helped the bulls defend the 100-day SMA. An intraday bounce in US Treasury bond yields, coupled with recession fears, offer some support for the safe-haven dollar. Meanwhile, fears of an economic slowdown are weighing on crude oil prices. This is undermining the commodity-linked loonie and stopping bears from making new bets.
Traders also appear reluctant and may prefer to stay on the sidelines ahead of this week’s key macroeconomic data due early in the week. The US economic docket begins with the release of the ISM Manufacturing PMI on Monday. This, along with US bond yields and general market risk sentiment, will drive demand for dollars. Additionally, the dynamics in oil prices should allow traders to take advantage of short-term opportunities around the USD/CAD pair.
However, the focus will continue to be on the monthly US employment report, popularly known as the NFP, due out on Friday. Additionally, traders will reference the simultaneous release of Canadian employment figures. This will play a key role in determining the next leg of a directional move for the USD/CAD pair.
Technical levels
Source: Fx Street
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