USD/CAD trades with modest losses, hold above mid-1.3700s amid softer Oil prices
|- USD/CAD retreats from the YTD peak, albeit the downside remains cushioned.
- Reduced Fed rate cut bets continue to act as a tailwind for the USD and the pair.
- Softer Crude Oil prices could undermine the Loonie and help limit the downside.
The USD/CAD pair comes under some selling pressure on the first day of a new week and erodes a part of Friday's strong move up to the 1.3785 region, or its highest level since November 14. Spot prices currently trade around the 1.3760-1.3755 zone, though any meaningful corrective decline still seems elusive in the wake of the underlying strong bullish sentiment surrounding the US Dollar (USD).
Investors pushed back their expectations for the first interest rate cut by the Federal Reserve (Fed) to September from June after data released from the US last week pointed to a still-sticky inflation. Moreover, market participants are now pricing in less than two rate cuts in 2024 as compared to three projected by the Fed. This remains supportive of elevated US Treasury bond yields, which allows the USD Index (DXY) to stand tall near the YTD peak and should act as a tailwind for the USD/CAD pair.
Meanwhile, Crude Oil prices struggle to lure buyers despite Iran's attack on Israel over the weekend, which raised the risk of a broader region conflict and could affect Oil supply from the Middle East. This, in turn, could undermine the commodity-linked Loonie and contribute to limiting the downside for the USD/CAD pair. Hence, any subsequent fall might still be seen as a buying opportunity and remain limited, warranting caution before confirming that spot prices have formed a near-term top.
Market participants now look to the US economic docket, featuring the release of monthly Retail Sales and the Empire State Manufacturing Index later during the early North American session. Apart from this, Fedspeak and the broader risk sentiment will drive the USD demand. This, along with Oil price dynamics, should produce short-term trading opportunities around the USD/CAD pair.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.