- USD/CAD drifts lower on Friday in reaction to positive news out of the US-Canada trade talks.
- An uptick in Oil prices further underpins the Loonie and contributes to the intraday downtick.
- A further USD recovery from a multi-month low could act as a tailwind for the currency pair.
The USD/CAD pair struggles to capitalize on the previous day's positive move and attracts some sellers on Friday amid some positive news coming out of the US-Canada trade talk. Ontario Premier Doug Ford said that the meeting with US Commerce Secretary Howard Lutnick was positive and productive and that it has lowered the temperature on the ongoing trade war led by US President Donald Trump's tariffs.
Adding to this, Canada's Industry Minister Francois-Philippe Champagne and Finance Minister Dominic LeBlanc said that the discussion was constructive and that talks would continue. This helps ease worries about a further escalation of trade tensions between the US and Canada, which, in turn, benefits the Canadian Dollar (CAD). Furthermore, the emergence of fresh buying around Crude Oil prices, following the overnight pullback from the weekly top, underpins the commodity-linked Loonie and exerts some downward pressure on the USD/CAD pair. That said, some follow-through US Dollar (USD) buying for the third straight day could offer support to the currency pair.
Reports that there will be enough Democratic votes to avoid a US government shutdown boost investors' confidence and trigger a modest bounce in the US Treasury bond yields, lending some support to the Greenback. Any meaningful USD appreciation, however, seems elusive in the wake of the growing acceptance that the Federal Reserve (Fed) will have to cut interest rates several times this year amid a tariff-driven US economic slowdown. The expectations were lifted by softer US consumer inflation figures and the Producer Price Index (PPI) report this week. This, along with a cooling US labor market, supports prospects for further easing by the Fed.
Meanwhile, Russian President Vladimir Putin expressed conditional support for a 30-day cease-fire proposal put forward by the US and Ukraine. This remains supportive of a generally positive tone around the equity markets and should contribute to capping the safe-haven buck, which, in turn, supports prospects for further losses for the USD/CAD pair. Traders now look forward to the release of the Preliminary Michigan US Consumer Sentiment and Inflation Expectations Index for some impetus later during the North American session. Apart from this, Oil price dynamics should contribute to producing short-term trading opportunities around the USD/CAD pair.
USD/CAD 4-hour chart
Technical Outlook
From a technical perspective, spot prices, barring a knee-jerk spike on Tuesday, have been oscillating in a range since the beginning of this week. This comes on top of the recent repeated failures to find acceptance above the 1.4500 psychological mark and warrants some caution for bullish traders. That said, positive oscillators on the daily chart support prospects for the emergence of some dip-buying at lower levels.
Hence, any subsequent slide below the 1.4400 mark is likely to find decent support and remain limited near the 1.4355-1.4350 area. The latter represents the lower boundary of the short-term trading range, which if broken could drag the USD/CAD pair to the 1.4300 mark en route to the monthly swing low, around the 1.4240-1.4235 region. This is followed by the 100-day Simple Moving Average (SMA), currently pegged near the 1.4215 area.
On the flip side, the 1.4470-1.4475 region could act as an immediate hurdle ahead of the 1.4500 mark and the weekly swing high, around the 1.4520 area. Some follow-through buying, leading to a move beyond the monthly top, around the 1.4545 zone, could allow the USD/CAD pair to reclaim the 1.4600 mark. The momentum could extend further towards the 1.4670 region en route to 1.4700 and the 1.4800 neighborhood, or over a two-decade high.
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