USD/CAD retreats further from multi-week top, slides closer to mid-1.3300s ahead of US CPI
- USD/CAD drifts lower for the second straight day and is pressured by a combination of factors.
- An uptick in Oil prices underpins the Loonie and weighs on the pair amid subdued USD demand.
- The downside potential seems limited as traders keenly await the release of the US CPI report.
The USD/CAD pair remains under some selling pressure for the second straight day on Thursday and moves further away from a nearly four-week high, around the 1.3415 region touched on Tuesday. Spot prices currently trade around the 1.3365-1.3360 area, down just over 0.10% for the day, as traders now look to the latest US consumer inflation figures for a fresh impetus.
The crucial US CPI report will influence the Federal Reserve's (Fed) future policy decisions, which, in turn, should drive the US Dollar (USD) demand and provide a fresh directional impetus to the USD/CAD pair. Heading into the key US data risk, the buck extends its consolidative price move and remains confined in a one-week-old trading range amid the uncertainty over the timing of when the US central bank will start cutting interest rates. Apart from this, a positive risk tone is seen as another factor denting the Greenback's relative safe-haven status and exerting some pressure on the currency pair.
Meanwhile, an uptick in Crude Oil prices is seen underpinning the commodity-linked Loonie and contributing to the offered tone surrounding the USD/CAD pair. That said, any meaningful upside for the black liquid, however, seems elusive in the wake of the bearish fundamental backdrop. The Energy Information Administration (EIA) report on Wednesday showed an unexpected weekly build in US inventories added to fears that global oil consumption will slow in 2024. This, to a larger extent, offsets worries about potential disruptions in Middle Eastern supplies and should act as a headwind for Oil prices.
Apart from this, diminishing odds for a more aggressive policy easing by the Fed, which remains supportive of elevated US Treasury bond yields, favours the USD bulls and contributes to limiting losses for the USD/CAD pair. Hence, it will be prudent to wait for strong follow-through selling before confirming that the recent strong recovery move from the 1.3175 region, or a multi-month low touched in late December has run its course and positioning for any further losses.
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.
