- USD/CAD attracted new sellers on Wednesday as the payback trended lower.
- Dovish Fed expectations and positive sentiment are putting heavy pressure on the dollar.
- Lower oil prices will weaken the Canadian dollar and provide support ahead of the Fed Powell meeting.
USD/CAD recovered somewhat in the Asian session on Thursday, breaking some of its overnight gains in the 1.3420 area, the lowest level since March 8. The US dollar rose 0.10% on the day, although some selling in gasoline prices could help cushion the decline.
The U.S. Dollar Index (DXY), which tracks the greenback against a basket of currencies, extended its rise from its lowest level since the beginning of the year almost overnight on bets that the Federal Reserve (Fed) would cut interest rates by another 50 basis points. Beyond that, the background noise, as exemplified by new competition in the stock market, added to the unsecured profits and led to a slight decline in USD/CAD.
Meanwhile, doubts about oil demand in China, the world’s largest exporter, and concerns about supply disruptions in Libya eased as gasoline prices edged away from three-week highs on Tuesday. Despite stimulus measures announced this week, investors remain uncertain about China’s economic recovery. That, along with signs that Libyan oil is returning to the market, appears to have added weight to the black liquid.
This could weaken demand for Canadian dollar-pegged commodities and provide some support to the USD/CAD pair. Investors also preferred to stay on the sidelines and avoid aggressive behavior ahead of the speech by members of the Federal Open Market Committee, including Fed Chair Jerome Powell, in the North American market. In addition, financial data from the US will also drive the dollar and create an open market.
