The USD/CAD pair continued its downward trajectory for the fourth straight day, trading in the 1.3735-1.3740 range during the early European session on Thursday. Bearish traders are now eyeing a break below the 1.3720 level, a two-week low set on Wednesday, to confirm the extension of the sharp retracement from the mid-1.3900s, the highest level since October 2022.
Anticipations of larger interest rate cuts by the Federal Reserve, driven by softer US economic data, have sparked a fresh decline in US Treasury bond yields. This decline has pulled the US Dollar away from the weekly peak it reached the previous day, exerting downward pressure on the USD/CAD pair. However, the prevailing cautious market mood might limit significant depreciation of the safe-haven Greenback.
Investor sentiment remains weighed down by China’s economic challenges, fears of a potential US recession, and persistent geopolitical risks from ongoing conflicts in the Middle East. Additionally, concerns that economic downturns in the world’s two largest economies could reduce fuel demand are impacting Crude Oil prices, which may undermine demand for the commodity-linked Canadian Dollar (Loonie) and provide some support to the USD/CAD pair.
Market participants are now focused on the US economic docket, which includes the usual Weekly Initial Jobless Claims data set to be released during the early North American session. Additionally, US bond yields and broader risk sentiment are likely to influence USD demand. Along with Oil price dynamics, these factors should provide some impetus to the USD/CAD pair. Attention will then shift to Canada’s monthly employment data, scheduled for release on Friday.
Related Topics:
