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The USD/CAD pair failed to capitalize on the previous day’s modest rebound from near yearly lows and encountered fresh supply during Thursday’s Asian session. However, spot prices remain confined to a multi-week range and are currently trading in the 1.3815 area, down 0.15% on the day.
The US dollar (USD) continues to struggle to find meaningful bids amid rising economic uncertainty sparked by U.S. President Donald Trump’s rapidly changing trade policy stance. In fact, Trump indicated that he is in no rush to sign any deal, adding that he is not willing to reduce the 145% tariffs imposed on China to encourage trade talks. This largely overshadowed the Federal Reserve’s (Fed) hawkish pause on Wednesday, which put the dollar bulls on the defensive and put pressure on the USD/CAD pair.
Meanwhile, crude oil prices regained positive momentum in a correction after hitting a one-week high and supported the commodity-linked Canadian dollar. Apart from this, expectations of a new US-Canada trade deal also benefited the Canadian dollar (CAD) and put some pressure on the USD/CAD pair. However, OPEC+’s decision to accelerate production increases has raised concerns about oversupply. This, coupled with demand concerns arising from waning hopes for a quick resolution to the US-China trade war, should limit any meaningful upside in crude oil prices.
Therefore, it would be wise to wait for strong follow-up selling before confirming a new breakout in the USD/CAD pair and prepare for a continuation of the recent sharp retracement slide from the two-decade highs hit in February. Traders are now looking forward to the release of the US weekly initial jobless claims data in the early North American session for some momentum. Beyond that, oil price dynamics should help generate short-term trading opportunities ahead of Friday’s Canadian employment report.
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