The USD/CAD pair is trading in a narrow range around the 1.3830 mark during Tuesday’s Asian session, remaining close to its highest level since August 6 reached the previous day. The current fundamental landscape appears favorable for bullish traders, indicating that the path of least resistance for the pair leans upward.
Crude oil prices are struggling to build on modest gains from the previous day, primarily due to concerns over slowing demand and a potential economic downturn in China, the world’s largest oil importer. Additionally, expectations of a larger 50-basis-point rate cut by the Bank of Canada—prompted by softer domestic consumer inflation figures—could continue to weigh on the commodity-linked Canadian dollar (Loonie). This, coupled with strong bullish sentiment surrounding the US Dollar (USD), supports a positive near-term outlook for the USD/CAD pair.
Recent positive US macroeconomic data suggests the economy remains robust, allowing the Federal Reserve (Fed) to adopt a patient approach to interest rate cuts. Comments from several influential Federal Open Market Committee (FOMC) members have reinforced market expectations for a less aggressive easing policy, contributing to rising US Treasury bond yields and elevating the USD Index (DXY) to its highest level in nearly three months.
A shift in global risk sentiment, evidenced by a softer tone in equity markets, is likely to benefit the safe-haven USD, further supporting the bullish trajectory of the USD/CAD pair. Traders are now anticipating the release of the Richmond Manufacturing Index from the US, alongside a speech from Philadelphia Fed President Patrick Harker, both of which could drive USD demand. Oil price movements will also play a crucial role in influencing the USD/CAD pair’s direction.
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