The USD/CAD currency pair attracted modest buying interest during the Asian trading session on Tuesday, although momentum was limited and prices remained within the range established the previous day. Currently, the pair hovers around 1.3565, reflecting a gain of less than 0.10% for the day, but still trading below the 200-day Simple Moving Average (SMA).
Crude oil prices have struggled to maintain momentum following a bounce from their lowest levels since June 2023. This hesitation is attributed to concerns over a slowdown in China, the world’s largest oil importer. Recent Chinese Trade Balance data revealed stagnant import levels in August, a stark contrast to the 6.6% increase observed in July, suggesting weaker domestic demand. Additionally, speculation about potential further interest rate cuts by the Bank of Canada (BoC)—driven by disappointing Canadian jobs data released on Friday—has put pressure on the Canadian dollar, thereby supporting the USD/CAD pair.
Conversely, the US dollar (USD) continues to find support amidst reduced expectations for a significant 50 basis point interest rate cut by the Federal Reserve (Fed) in September. This shift in expectations follows the mixed US Nonfarm Payrolls (NFP) report released on Friday. While the USD/CAD pair has gained some support from this development, caution is warranted ahead of BoC Governor Tiff Macklem’s upcoming speech and the US inflation data release.
Investors are particularly focused on the US Consumer Price Index (CPI) report, scheduled for release on Wednesday, followed by the Producer Price Index (PPI) on Thursday. These reports are anticipated to shape market expectations regarding the Fed’s potential interest rate decisions and influence demand for the US dollar. Additionally, fluctuations in oil prices will be crucial in determining the future direction of the USD/CAD pair.
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