- A combination of factors drags USD/CAD away from the YTD peak touched on Wednesday.
- A modest uptick in Oil prices underpins the Loonie and exerts pressure amid a weaker USD.
- A positive risk tone is seen as another factor denting demand for the safe-haven Greenback.
The USD/CAD pair remains under some selling pressure for the second successive day on Thursday and extends the overnight rejection slide from the 1.3900 mark, or its highest level since October 2022. The downtick drags spot prices to the 1.3825 area during the Asian session and is sponsored by a combination of factors.
Crude Oil prices gain some positive traction and for now, seem to have snapped a three-day losing streak to over a two-month low touched on Wednesday, which is seen underpinning the commodity-linked Loonie. The US Dollar (USD), on the other hand, continues to be weighed down by expectations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle and contributes to the offered tone surrounding the USD/CAD pair.
Fed Chair Jerome Powell, addressing the press at the end of a two-day policy meeting, noted that the recent market-driven surge in borrowing costs could have its impact on economic activity and that financial conditions may be tight enough already to control inflation. The markets were quick to price in the possibility that the Fed will start cutting rates in June 2024, which is reinforced by the ongoing slide in the US Treasury bond yields.
The yield on the rate-sensitive two-year US government bond falls to its lowest level since September 8 and the benchmark 10-year Treasury yield moves away from the 5% threshold. This, along with a generally positive tone around the equity markets, turns out to be another factor denting the Greenback's relative safe-haven status. The Fed, meanwhile, acknowledged the US economic resilience and left the door open for additional rate hikes.
In contrast, the Bank of Canada (BoC) Governor Tiff Macklem indicated last week that interest rates may have peaked. This might hold back traders from placing aggressive bearish bets around the USD/CAD pair and warrants some caution before confirming that spot prices have topped out in the near term. Market participants now look to the US macro data – Weekly Initial Jobless Claims and Factory Orders – for short-term trading impetus.
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 treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.