In this article, we analyze the recent movements in the USD/CAD pair as it edges lower from an eight-month high. The slight increase in Oil prices is providing support for the commodity-linked Canadian Dollar, but concerns about the US economy may limit the downside of the pair.
During the Asian session on Friday, USD/CAD is trading near 1.3860, maintaining its position near the high of 1.3889 reached on Thursday. The rise in crude Oil prices, with West Texas Intermediate (WTI) nearing $76.50 per barrel, is bolstering the Canadian Dollar as Canada is a major exporter of Oil to the US.
Despite global worries about Oil demand, geopolitical tensions in the Middle East are supporting Oil prices. This, coupled with concerns about the US economy, has led to increased risk aversion. Recent data showing a slowdown in US manufacturing and an uptick in jobless claims have raised expectations of a Federal Reserve rate cut.
Traders are closely watching upcoming US Nonfarm Payrolls and Average Hourly Earnings data for insights into the labor market. The Bank of Canada’s influence on the Canadian Dollar, along with factors like Oil prices, inflation, and economic indicators, are key drivers of the currency’s value.
In conclusion, the USD/CAD pair’s retreat from its high is influenced by a combination of factors including Oil prices, US economic concerns, and market sentiment. Understanding these dynamics is crucial for investors looking to navigate the foreign exchange market and make informed decisions about their portfolios.