- USD/CAD gains traction for the second straight day and recovers further from the YTD low.
- Weaker Oil prices undermine the Loonie and lend support amid a modest USD strength.
- A goodish pickup in the US bond yields and a softer risk tone benefit the safe-haven buck.
The USD/CAD pair builds on the previous day's modest recovery from its lowest level since September 2022 and gains positive traction for the second successive day on Tuesday. Spot prices maintain the bid tone through the Asian session and currently trade around the 1.3225-1.3230 region, up 0.15% for the day.
Crude Oil prices remain depressed in the wake of worries that a global economic slowdown, particularly in China, will dent fuel demand. This, in turn, undermines the commodity-linked Loonie, which, along with a modest US Dollar (USD) strength, acts as a tailwind for the USD/CAD pair. It is worth recalling that the recent Chinese macro data showed that the world's second-largest economy is struggling to sustain the momentum seen earlier this year.
Even reports that China is considering a broad stimulus package to bolster economic support and the expected move by the People's Bank of China (PBoC), to cut one-year and five-year Loan Prime Rates (LPRs), fail to ease market concerns. This is evident from a weaker risk tone, which, along with a goodish pickup in the US Treasury bond yields, pushes the safe-haven USD higher for the third straight day and lends support to the USD/CAD pair.
The Federal Reserve (Fed), though skipped a rate hike last week, signalled that borrowing costs may still need to rise by as much as 50 bps by the end of this year. The markets were quick to react and are now pricing in another 25 bps lift-off at the July FOMC meeting, which, in turn, triggers a fresh leg up in the US bond yields. That said, the incoming softer US economic data raised questions over how much headroom the Fed has to keep raising rates.
Hence, the market focus now shifts to Fed Chair Jerome Powell's congressional testimony on Wednesday and Thursday, which will be scrutinized for fresh clues about the future rate-hike path. This, in turn, will play a key role in determining the near-term trajectory for the USD and provide some meaningful impetus to the USD/CAD pair. In the meantime, Oil price dynamics should allow traders to grab short-term opportunities around the major.
Technical levels to watch
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD retreats to 1.0700 area following post-PCE jump
After spiking to a daily high of 1.0720 with the immediate reaction to US PCE inflation data, EUR/USD lost its traction and declined to the 1.0700 area. Investors remain cautious ahead of this weekend's French election and make it difficult for the Euro to gather strength.
GBP/USD stays below 1.2650 after US inflation data
GBP/USD struggles to preserve its bullish momentum and trades below 1.2650 in the American session on Friday. Earlier in the day, the data from the US showed that the annual core PCE inflation declined to 2.6% in May, limiting the USD's upside and helping the pair hold its ground.
Gold keeps its daily gains near $2,330 following US PCE data
Gold prices maintain their constructive bias around $2,330 after US inflation readings gauged by the PCE matched consensus in May and US yields advance slightly across the curve.
BTC struggles around the $62,000 level
Bitcoin price faces pullback resistance at the lower band of the descending wedge around $62,000. Ethereum price finds support at $3,288, the 61.8% Fibonacci retracement level. Ripple price faces resistance at $0.500, its daily resistance level.
French Elections Preview: Euro to suffer after the calm, as specter of extremists, uncertainty rise Premium
The first round of French parliamentary elections is set to trigger high uncertainty. Soothing messages from the far right and far left leave the Euro vulnerable to falls. Calm may return only after the second round of voting on July 7.