- USD/CAD draws intraday selling pressure after reaching a fresh multi-year high, following a slight pullback in the USD.
- Oil prices stay below a multi-week peak, weighing on the Canadian dollar and providing support to the currency pair.
- Traders appear cautious, choosing to wait for US President-elect Donald Trump’s inaugural address before making further moves.
The USD/CAD pair slightly pulled back after reaching its highest level since March 2020 during the Asian session on Monday, ending a two-day winning streak. Currently, spot prices are trading around the mid-1.4400s, down 0.10% for the day, as the US Dollar (USD) experiences a modest dip, although the move lacks momentum or clear bearish sentiment.
Recent signs of easing inflation in the US have raised expectations that the Federal Reserve may cut interest rates twice this year, which failed to help the USD build on Friday’s positive performance. Additionally, a generally positive risk sentiment in the equity markets is weighing on the safe-haven US Dollar and impacting the USD/CAD pair. Investors also anticipate that US President-elect Donald Trump’s protectionist policies could increase inflation, potentially leading the Fed to take a more hawkish approach, creating some caution among USD bears.
At the same time, easing tensions in the Middle East and the expectation that Trump may ease sanctions on Russia in exchange for a deal to end the Ukraine conflict have mitigated concerns about tighter oil supplies, putting downward pressure on Crude Oil prices. This, in turn, could undermine the commodity-linked Canadian Dollar and help limit the USD/CAD pair’s losses. Traders appear hesitant, opting to wait for Trump’s inaugural address later today, suggesting that it may be wise to wait for further price action before positioning for deeper declines.
