The USD/CAD pair is struggling to build on Friday’s strong intraday rally of over 100 pips and is trading with a mild negative bias around the mid-1.3500s during the Asian session on Monday. The slight decline is influenced by a modest rise in crude oil prices, though several factors are likely to limit deeper losses.
Crude oil prices have rebounded from their lowest levels since June 2023, supported by forecasts of a potential hurricane approaching the northwestern US Gulf Coast, which accounts for 60% of US refining capacity. This scenario is expected to bolster the commodity-linked Canadian Dollar (CAD) and exert some downward pressure on the USD/CAD pair. However, a weaker Canadian jobs report released on Friday has raised expectations for additional interest rate cuts by the Bank of Canada (BoC), which could cap gains for the CAD.
In the US, mixed employment data from Friday highlighted a sharp deterioration in the labor market. Combined with reduced expectations for a significant rate cut by the Federal Reserve (Fed), this has tempered investor appetite for riskier assets and driven some haven flows towards the US Dollar (USD). This dynamic may further discourage aggressive bearish bets against the USD/CAD pair, suggesting that traders should wait for more substantial selling pressure before considering further downward positions.
Looking ahead, there are no significant economic releases scheduled for Monday from either the US or Canada. As a result, the USD is likely to be influenced by broader risk sentiment and US bond yields. Additionally, fluctuations in oil prices are expected to impact the Canadian Dollar and create short-term trading opportunities around the USD/CAD pair.
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