USD/CAD remains near two-week low on weaker USD, falling oil prices offer support
- USD/CAD remains under some selling pressure for the fourth consecutive day on Thursday.
- Cautious Fed expectations and falling US bond yields are weighing on the USD and exerting some pressure.
- A slight decline in oil prices could weaken the loonie and provide support to the major currency.
The USD/CAD pair is declining for the fourth straight day, trading in the 1.3735-1.3740 range during the early European session on Thursday. Pessimistic traders are now expecting further selling below the 1.3720 area, or above a two-week low reached on Wednesday, before positioning for an extension of this week’s sharp retracement decline from near the mid-1.3900 level, or the highest level since October 2022.
Rising expectations of deeper interest rate cuts by the Federal Reserve (Fed), fuelled by weaker US economic data, are triggering a renewed decline in US Treasury yields. This, in turn, is pulling the US dollar (USD) away from its weekly high reached the previous day and is likely to put downward pressure on the USD/CAD pair. However, the prevailing cautious market sentiment could help limit any significant depreciation of the safe-haven greenback.
Against the backdrop of China’s economic woes, fears of a potential recession in the US as well as ongoing geopolitical risks due to ongoing conflicts in the Middle East are weighing on investor sentiment. In addition, worries that an economic slowdown in the world’s two largest economies could affect fuel demand are weighing on crude oil prices, which could hurt demand for the commodity-linked loonie and lend support to the USD/CAD pair.
Market participants are now looking ahead to the US economic themes, which include the usual weekly initial jobless claims data later during the early North American session. Apart from that, US bond yields and overall risk sentiment could influence USD demand, which, along with oil price dynamics, should provide some impetus to the USD/CAD pair. The market’s attention will then turn to the monthly employment data from Canada, which is scheduled to be released on Friday.
Economic indicator
Unemployment rate
The unemployment rate published by Statistics Canada is the number of unemployed divided by the total civilian labor force, expressed as a percentage. It is a leading indicator of the Canadian economy. When the rate increases, it indicates a lack of expansion in the Canadian labor market and a weakening of the Canadian economy. Generally, a decrease in the number is considered positive for the Canadian dollar (CAD), while an increase is considered negative.
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Next version: Fri, August 9, 2024, 12:30 p.m.
Frequency: Monthly
Consensus: 6.5%
Previous: 6.4%
Source: Statistics Canada
