USD/CAD updates to its daily low after US durable goods orders, with an eye on the 1.3550 area

• The USD/CAD pair continues to retreat from its highest level since January, against a backdrop of widespread dollar weakness.
• Momentum in favor of risk causes profit taking around the safe haven dollar and weighs on the pair.
• Weakening oil prices could undermine the Loonie and support it amid hawkish expectations from the Fed.

The pair USD/CAD comes under strong selling pressure on the first day of a new week and falls further back from its highest level since January 6 reached on Friday. The pair maintains its offered tone, around the 1.3565-1.3560 region during the early American session and reacts little to mixed US macroeconomic data.

The US Census Bureau reported Durable Goods Orders fell 4.5% in January, a sharp drop from the previous month’s downwardly revised reading of strong 5.1 growth. %. The disappointment, however, is offset by orders excluding transportation items, which rose 0.7% over the reported month, versus a modest 0.1% rise expected, failing to provide any momentum.

That said, the recovery in global risk sentiment, reflected in a generally positive tone in equity markets, continues to weigh on the safe-haven dollar. This, in turn, is seen as a key factor putting pressure on the USD/CAD pair, although a combination of factors should help limit deeper losses and warrants some caution before positioning for any further decline.

Crude oil prices find themselves in fresh supply amid concerns that rapidly rising borrowing costs will slow economic growth and dent fuel demand. This could undermine the commodity-linked Loonie. Apart from this, expectations that the Fed will maintain its hawkish stance in the wake of stubbornly high inflation support the prospects for some USD declines.

Even from a technical perspective, the USD/CAD pair confirmed a break through the 100-day SMA last week, which favors the bulls. Furthermore, speculation that the Bank of Canada will pause the tightening cycle makes it prudent to wait for strong selling to confirm that the pair has topped out in the near term.

Technical levels to watch