The USD/CAD currency pair continues its downward trend, breaking through the 50-day Simple Moving Average (SMA) and facing sustained selling pressure for the second consecutive day on Monday. This movement has driven spot prices to a one-month low, around the 1.3665-1.3660 range, during the Asian session, influenced by bearish sentiment toward the US Dollar (USD).
The USD Index (DXY), which measures the Greenback against a basket of currencies, has retreated closer to its lowest level since January, driven by expectations that the Federal Reserve (Fed) may initiate a rate-cutting cycle in September. These expectations were bolstered by San Francisco Fed President Mary Daly’s comments advocating for a gradual reduction in borrowing costs. This perspective overshadowed an improvement in the University of Michigan’s preliminary US Consumer Sentiment Index, which rose to 67.8 in August, marking its first increase in four months.
Additionally, a generally positive outlook in equity markets has reduced demand for the safe-haven USD, further pressuring the USD/CAD pair. The ongoing decline can also be attributed to technical selling following last week’s breakdown and the subsequent rejection at the 50-day SMA, which had shifted from support to resistance.
Furthermore, weaker Crude Oil prices could impact the commodity-linked Canadian Dollar (Loonie) and discourage traders from taking new bearish positions ahead of key economic events this week. Canadian consumer inflation figures are set to be released on Tuesday, followed by the FOMC meeting minutes on Wednesday. Investors will also be keenly watching Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium for indications on the central bank‘s future policy direction. These events are expected to significantly influence short-term USD price movements. Additionally, geopolitical developments in the Middle East, which affect Crude Oil prices, will play a crucial role in determining the next directional move for the USD/CAD pair.
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