The USD/CAD pair remains under some selling pressure for the third successive day on Friday and extends its steady descent through the first half of the European session. The downward trajectory drags spot prices below a technically significant 100-day Simple Moving Average (SMA) and the 1.3500 psychological mark to a two-week low in the last hour.
Crude Oil prices gain some follow-through traction and look to build on the recovery from a 17-month low touched on Thursday. The Bank of Canada (BoC) Governor Tiff Macklem’s hawkish comments underpin the commodity-linked Loonie overnight. This, in turn, is seen exerting some downward pressure on the USD/CAD pair amid the emergence of fresh selling around the US Dollar (USD).
In a prepared speech at the Toronto Region Board of Trade, Macklem reiterated the central bank’s commitment to restore price stability and showed readiness to raise interest rates further if inflation remains materially above the 2% target. In contrast, Federal Reserve (Fed) Chair JeromePowell signaled earlier this week that the central bank was close to hitting the terminal rate of the current tightening cycle.
Moreover, the US central bank further outlined a more stringent and data-driven approach to hiking rates. This and fears of a full-blown US banking crisis and debt ceiling continue to weigh on the buck. Apart from this, a modest recovery in the US equity futures also seems to dent the Greenback’s relative safe-haven status. However, a further recovery in the US Treasury bond yields could limit losses.
Furthermore, worries about weakening the US economy and slowing Chinese demand might keep a lid on any meaningful upside for Oil prices, which, in turn, could lend support to the USD/CAD pair. Traders might also refrain from placing aggressive bets ahead of the closely-watched monthly employment details (NFP) from the US, likely to overshadow the simultaneous release of the Canadian jobs data.
From a technical perspective, a convincing break and acceptance below the 100-day SMA could be a new trigger for bearish traders. Moreover, technical indicators on the daily chart have just started drifting into the negative territory and support prospects for a further near-term depreciating move. This, in turn, suggests that the path of least resistance for the USD/CAD pair remains on the downside.