The USD/CAD pair meets with a fresh supply following an early uptick to the 1.3355-1.3360 region on Monday and turns lower for the fifth successive day – also marking the eighth day of a negative move in the previous nine. Spot prices extend the intraday descent through the first half of the European session and drop to the 1.3320-1.3315 region in the last hour, closer to over a one-month low touched on Friday.
A positive tone around the equity markets fails to assist the safe-haven US Dollar (USD) to capitalize on Friday’s bounce from its lowest level since May 24 and attracts fresh sellers on the first day of a new week. Apart from this, the Bank of Canada’s (BoC) surprise 25 bps rate hike last week continues to underpin the Canadian Dollar (CAD) and exerts some downward pressure on the USD/CAD pair. That said, a combination of factors might hold back traders from placing fresh bearish bets around the major and help limit losses for the major, at least for the time being.
The uncertainty over the Federal Reserve’s (Fed) rate hike path, along with a modest uptick in the US Treasury bond yields, could act as a tailwind for the Greenback. It is worth recalling that the recent dovish rhetoric by a slew of influential Fed officials fueled speculations that the US central bank will skip raising interest rates at the end of a two-day meeting on Wednesday. The markets, however, are still pricing in the possibility of another 25 bps lift-off at the July FOMC meeting on the back of expectations that the fight against stubbornly high inflation is not over yet.
Furthermore, worries that a global economic slowdown will dent fuel demand continue to weigh heavily on Crude Oil prices, which could undermine the commodity-liked Loonie and lend some support to the USD/CAD pair. Traders might also prefer to wait on the sidelines ahead of the latest US consumer inflation figures, due for release on Tuesday, and the highly-anticipated FOMC policy decision on Wednesday. This, in turn, will play a key role in driving the USD demand and help traders to determine the next leg of a directional move for the major.