USD/CAD Oscillates In A Range Around 1.3620 Area, Just Below A Nearly One-Month High

The USD/CAD pair enters a bullish consolidation phase on Wednesday and oscillates in a narrow trading band through the first half of the European session. The pair is currently in neutral territory, around the 1.3620 regions, just below a nearly one-month high touched the previous day.

Crude Oil prices gained some positive traction and reversed a part of Tuesday’s slide to a fresh monthly low amid reports of falling US fuel inventories, which pointed to robust demand in the world’s top consumer. This, in turn, underpins the commodity-linked Loonie and acts as a headwind for the USD/CAD pair amid the emergence of fresh US Dollar (USD) selling.

The intraday USD downtick could be attributed to the recent slump in the US Treasury bond yields amid fresh concerns about the regional banking sector. The yield on the benchmark 10-year US government bond registered its most significant decline since March after the First Republic Bank reported a more than $100 billion plunge in deposits during the first quarter.

The Conference Board’s Consumer Confidence Index unexpectedly dropped to a nine-month low in April, fueling worries about a deeper economic downturn. This, in turn, lifted bets for an imminent rate cut by the Federal Reserve (Fed) later this year, which dragged longer-duration Treasury yields lower across the board and is seen weighing on the Greenback.

Apart from this, signs of stability in the equity markets are another factor weighing on the safe-haven buck and contributing to capping the upside for the USD/CAD pair, at least for now. The Fed, however, is still expected to deliver a 25 bps rate hike in May, which acts as a tailwind for the US bond yields and lends support to the USD.

The aforementioned fundamental backdrop favors bulls and suggests that the path of least resistance for spot prices is to the upside. Traders, however, seem reluctant and move to the sidelines ahead of this week’s key US macro releases, including the Advance Q1 GDP on Thursday and the Core PCE Price Index – the Fed’s preferred inflation gauge on Friday.

In the meantime, traders on Thursday will take cues from the release of the US Durable Goods Orders data, due later during the early North American session. The data might influence the USD and provide some impetus to the USD/CAD pair. Apart from this, Oil price dynamics might further contribute to producing short-term opportunities around the major.

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