The USD/CAD currency pair faces difficulties in maintaining momentum after breaking through the key 200-day Simple Moving Average (SMA) earlier this week. After reaching a nearly three-week high around 1.3615 on Wednesday, the pair has retreated, trading down to the 1.3590-1.3585 range, marking a new daily low in the last hour of trading.
Crude oil prices surged by approximately 1.75%, recovering from their lowest levels since May 2023. This increase, driven by concerns over supply disruptions caused by Hurricane Francine in the United States, has supported the Canadian Dollar (CAD), which is commodity-linked. Coupled with fresh selling of the US Dollar (USD), these factors have pressured the USD/CAD pair downward.
Despite this, expectations for additional interest rate cuts by the Bank of Canada (BoC), fueled by Friday’s disappointing Canadian jobs data, may limit significant gains for the CAD. Additionally, reduced expectations for a more substantial interest rate cut by the Federal Reserve (Fed), combined with a softer risk sentiment, could provide support for the USD and cap losses for the USD/CAD pair.
Traders appear cautious and are likely to wait for the release of the US Consumer Price Index (CPI) report before making new directional bets. It may be prudent to await confirmation of strong follow-through selling before concluding that the recent recovery from the 1.3440 level, a multi-month low reached in August, has fully played out.
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