The USD/CAD pair experienced some selling pressure during Thursday’s Asian session, paring back part of its overnight recovery gains from the 1.3420 region—its lowest level since March 8. Currently, the spot price hovers around the 1.3470-1.3465 range, down by more than 0.10% amid a slight downturn in the US Dollar (USD). However, potential follow-through selling in Crude Oil prices could help prevent more significant losses for the currency pair.
The US Dollar Index (DXY), which measures the Greenback against a basket of major currencies, stalled after a good overnight rebound from near its year-to-date (YTD) low, as markets begin to price in another potential 50 basis point rate cut by the Federal Reserve (Fed) in November. A broader bullish sentiment, illustrated by a rise in equity markets, is also dampening demand for the safe-haven USD, applying further downward pressure on the USD/CAD pair.
Meanwhile, Crude Oil prices have pulled back from their recent three-week highs due to doubts about sustained fuel demand growth in China—the world’s largest oil importer—and easing concerns over potential supply disruptions from Libya. Despite a series of stimulus measures from China this week, investors are still cautious about the country’s economic recovery. Additionally, the prospect of Libyan oil returning to the market is weighing on oil prices, which could, in turn, affect demand for the oil-linked Canadian Dollar (Loonie) and provide some support to the USD/CAD pair.
Traders are likely to remain cautious, holding off on making aggressive bets ahead of speeches from key Federal Open Market Committee (FOMC) members, including Fed Chair Jerome Powell, during the North American session. Additionally, upcoming US economic data releases will further influence USD demand and could create short-term trading opportunities.
