- USD/CAD meets fresh sales on Wednesday and erodes some of the previous day’s gains.
- USD weakness turns out to be the only factor putting some downward pressure on the pair.
- Weakening oil prices could weigh on the CAD and lend support to the pair ahead of the US CPI report.
The pair USD/CAD has difficulty taking advantage of the positive movement of the previous day and meets fresh sales near the 1.2900 region on Wednesday. The pair remains under pressure during the first half of the European session and is currently trading near the daily low around the 1.2865-1.2870 area.
The US dollar continues its struggle to gain any significant traction amid the uncertainty about the path of the Fed rate hike, which turns out to be a key factor offering support to the USD/CAD pair. The New York Fed survey of consumer expectations showed that inflation outlook fell sharply in July and pushed back speculation about a more aggressive tightening of the Fed’s monetary policy.
Nevertheless, markets continue to price in 70% chances of a 75 basis point rate hike at the September FOMC meeting. This coupled with cautious sentiment is acting as a tailwind for the safe haven USD and should help limit deeper losses for the USD/CAD pair. Market sentiment remains fragile amid growing recession fears and US-China tensions about Taiwan.
Investors, for their part, remain concerned about the possibility of a global economic downturn affecting fuel demand. Furthermore, the latest moves to revive the Iran nuclear deal could pave the way for boosting crude supply in a tight market. This, in turn, causes further selling around crude oil prices, what could weigh on the CAD, a currency linked to commodity pricesand offer more support to the USD/CAD pair.
Investors may also refrain from taking aggressive positions and would prefer to wait on the sidelines ahead of US consumer inflation numbers due later in the American session. The US CPI report will be key in influencing short-term dollar price dynamics and will help determine the next directional move for the USD/CAD pair.
USD/CAD technical levels
Source: Fx Street
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