The USD/CAD pair is facing challenges as it struggles to attract buyers amidst a dovish Fed and broad-based USD weakness. The subdued Crude Oil prices are also adding pressure on the Loonie, offering some support to the major currency pair. Traders are cautious ahead of the upcoming FOMC meeting next week, which adds to the uncertainty in the market.
Crude Oil prices have stalled this week due to worries about output disruptions caused by Hurricane Francine in the US Gulf of Mexico, coupled with a weak demand outlook. OPEC and the International Energy Agency have both revised their forecasts for global oil demand growth, which is impacting the commodity-linked Loonie and supporting the USD/CAD pair.
On the other hand, the USD is facing weakness as the market anticipates a more aggressive policy easing by the Federal Reserve. The latest data on the US Producer Price Index has fueled speculations of a larger rate cut at the upcoming FOMC meeting. This has led to a decline in the yield on the 10-year US government bond, contributing to the USD slump and limiting the upside for the USD/CAD pair.
Looking ahead, traders are closely watching the Preliminary Michigan US Consumer Sentiment Index for short-term trading opportunities. The technical outlook suggests that the USD/CAD pair could appreciate further, but faces resistance near the 38.2% Fibonacci retracement level. A sustained break above this level could lead to a retest of the 1.3700 mark.
However, a downside move below the 1.3565 area could signal a shift in momentum, with the pair vulnerable to a slide back towards the 1.3440 region. The outcome of the FOMC meeting will be a key driver for the currency pair’s direction in the near term.
Analysis and Breakdown:
The USD/CAD pair is currently facing challenges due to dovish Fed expectations and weak Crude Oil prices. The market is cautious ahead of the upcoming FOMC meeting, which could impact the currency pair’s direction. Traders are closely watching key data releases and technical levels for potential trading opportunities. The outcome of the FOMC meeting will be crucial in determining the USD/CAD pair’s next move, with a break above key resistance levels signaling further upside potential.