USD/CAD flat-lines below 1.3600 mark as sliding Oil prices offset modest USD weakness
- USD/CAD struggles to capitalize on its modest intraday uptick amid a slight USD pullback.
- Rising bets for more rate hikes by the Fed act as a tailwind for the buck and the major.
- A fresh leg down in Oil prices further undermines the Loonie and lends support to the pair.
The USD/CAD pair attracts some intraday selling on Tuesday and drops to a four-day low during the early North American session. Spot prices, however, manage to rebound a few pips in the last hour and currently trade just below the 1.3600 mark, nearing unchanged for the day.
The US Dollar (USD) pulls back from its highest level since mid-March touched earlier this Tuesday amid a sharp intraday slide in the US Treasury bond yields and turns out to be a key factor acting as a headwind for the USD/CAD pair. That said, firming expectations that the Federal Reserve (Fed) will keep interest rates higher for longer might continue to lend support to the US bond yields and favours the USD bulls.
In fact, the current market pricing indicates a greater chance of another 25 bps lift-off at the June FOMC policy meeting and the bets were reaffirmed by the recent hawkish remarks by a slew of influential Fed officials. Adding to this, the stronger US Core PCE Price Index released on Friday pointed to sticky inflation, which should allow the US central bank to maintain its hawkish stance and continue raising interest rates.
Apart from this, the prevalent cautious market mood supports prospects for the emergence of some dip-buying around the USD. Investors remain concerned about slowing global economic growth, which, along with fresh US-China tensions, overshadows the latest optimism over a tentative deal to suspend the US government's $31.4 trillion debt ceiling until January 2025 and avert an unprecedented American default.
Furthermore, a fresh leg down in Crude Oil prices seems to undermine the commodity-linked Loonie and further contributes to limiting the downside for the USD/CAD pair. The aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside. Hence, any subsequent slide is more likely to remain limited as traders now look to the Conference Board's US Consumer Confidence Index.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
