The US Dollar posted modest gains ahead of Tuesday’s European market open, with the USD/CAD pair rebounding from Monday’s seven-month low. The pair is approaching a critical support zone between 1.3750 and 1.3765, where bullish momentum is expected to face significant resistance.
Last week, the Greenback slumped 1.75% against the Canadian Dollar amid widespread investor sell-off triggered by Moody’s downgrade of the US debt rating and mounting worries over the fiscal implications of President Trump’s expansive tax reform plan.
Concerns over US debt continue to weigh heavily on the Dollar. The Congressional Budget Office projects that Trump’s proposed tax cuts, currently set for Senate review, could increase the national debt by $3.8 trillion over the next decade.
On Tuesday, the Canadian Dollar showed slight softness as oil prices retreated from last week’s highs. With no major economic data due from Canada, the mild dip in crude along with market speculation that the Bank of Canada may cut rates again following next month’s meeting are dampening speculative demand for the loonie.
Investors are now turning their attention to key US data releases scheduled later today, including Durable Goods Orders and the Conference Board’s Consumer Confidence index. These reports are anticipated to shed light on how Trump’s unpredictable trade policies are affecting American manufacturing and consumer spending.
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