- USD/CAD remains under some selling pressure for the fourth day in a row on Tuesday.
- Bullish crude oil prices support the Loonie and act as a headwind amid a weaker USD.
- Now, traders are watching US macro data for some momentum ahead of the BOC on Wednesday.
The pair USD/CAD it falls for the fourth day in a row on Tuesday and remains depressed in the middle of the European session. The pair is currently hovering around the mid-1.3350 zone, just a few points above the 1-week low hit on Monday, and looks vulnerable to further decline.
Despite a softer risk tone, the safe-haven dollar struggles to capitalize on its modest intraday recovery from a nine-month low and acts as a headwind for the USD/CAD pair. The growing acceptance that the Fed will ease its hawkish stance amid signs of easing inflationary pressure turns out to be a key factor that continues to weigh on the dollar.
In fact, markets have been pricing in a higher probability of a 25 basis point Fed rate hike in February. This, coupled with softer US Treasury yields, keeps USD bulls on the defensive. Apart from this, the recent recovery in crude oil prices to a high in more than a month is supporting the commodity-linked Loonie and putting pressure on the USD/CAD pair.
The aforementioned fundamental undertones favor the bears and support the prospects of an extension of the recent bearish trajectory of the USD/CAD pair. Even from a technical point of view, the failure to find acceptance above the 100-day SMA last week validates the negative outlook and suggests that the path of least resistance for the pair is to the downside.
Traders, however, seem reluctant to make aggressive bets, preferring to stay on the sidelines awaiting key central bank data and events this week. The Bank of Canada is scheduled to announce its policy decision on Wednesday. Next, the fourth quarter GDP preview and the US core PCE price index will be released on Thursday and Friday, respectively.
Therefore, it would be prudent to wait for selling below the monthly low, around the 1.3320 zone, before placing further bearish bets. Traders’ attention now turns to US macro data: preliminary PMI data and the Richmond Manufacturing Index, both of which could weigh on the dollar. This, coupled with oil price dynamics, should give the USD/CAD pair some momentum.
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.
