The USD/CAD pair continues its downward trend, marking the fifth negative movement in the past six days. During the early part of the European session on Friday, it reached a two-and-a-half-week low. Currently trading around the 1.3420-1.3415 region, the pair has dropped over 0.20% for the day, facing pressure from various factors.

Crude oil prices contribute to the Loonie’s strength as they experience a strong recovery, rallying another 1% on the final day of the week. This rally supports the commodity-linked Canadian dollar.

Conversely, the US Dollar (USD) remains weak due to expectations that the Federal Reserve (Fed) will likely refrain from raising interest rates in its upcoming meeting later this month. This adds to the negative sentiment surrounding the USD/CAD pair.

Philadelphia Fed President Patrick Harker emphasized on Thursday the need to pause at least for one meeting and assess the situation. Similar sentiments expressed by influential FOMC officials have led investors to reduce their expectations for a 25 basis points rate hike in June. As a result, US Treasury bond yields declined further on Thursday, putting downward pressure on the US Dollar.

Additionally, the approval of legislation to raise the US government’s debt ceiling and avoid a potentially catastrophic default has boosted investor confidence. This positive sentiment supports a generally favorable risk appetite in the equity markets and contributes to the weakening of the safe-haven US Dollar. Consequently, the prospects for further intraday losses for the USD/CAD pair are strengthened.

Traders, however, may adopt a cautious approach and wait on the sidelines ahead of the release of the highly anticipated US monthly employment report during the early North American session. The Non-Farm Payrolls (NFP) report, known for its influence on USD demand, along with the dynamics of oil prices, will provide traders with short-term opportunities involving the USD/CAD pair.


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