The USD/CAD pair has extended its bearish trajectory for the fourth consecutive day and has plunged to a three-week low around the 1.3325-1.3320 region, ahead of the North American session.
This drop can be attributed to the increase in crude oil prices, which have gained strong momentum for the third day in a row. The rise in oil prices is due to optimism over the recovery of fuel demand following eased concerns about a recession.
Additionally, upbeat Canadian monthly employment data has supported the commodity-linked Loonie. A weak US dollar has also contributed to the downward trend surrounding the USD/CAD pair.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, has remained near the monthly low set last week due to the Fed’s decision to halt its year-long rate-hiking cycle. The Fed Fund futures suggest a 90% probability of the US central bank holding interest rates steady in June.
Moreover, the markets are also predicting that the Fed may start cutting rates in the second half of this year. Concerns about a potential banking crisis and the US debt ceiling have added to the pressure on the USD/CAD pair.
Despite a positive risk tone, the USD bulls are on the defensive. However, the intraday pickup in the US Treasury bond yields has limited deeper losses for the Greenback. Traders are now awaiting the latest US consumer inflation figures for fresh impetus, which could lend support to the major and caution bearish traders.
From a technical standpoint, the USD/CAD pair broke below the 200-day Simple Moving Average (SMA) on Friday, which marks a fresh breakdown, indicating a further depreciating move in the near-term.
Therefore, any attempted recovery runs the risk of fizzling out quickly and is likely to remain capped for now in the absence of any significant market-moving economic releases from either the US or Canada.
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