The USD/CAD pair remained under some selling pressure at the start of a new trading week and is currently placed at near one-month lows. The pair extended its retracement slide from near one-year tops and has now fallen around 300-pips from the 1.3400 neighborhood set on June 27. A combination of factors, ranging from persistent US Dollar selling bias and positive oil prices, collaborated to the pair’s steady decline through the Asian session on Monday. Despite Friday’s better-than-expected headline NFP print, the greenback struggled near 3-1/2 week lows and was being weighed down by softer average hourly earnings growth data that witnessed a modest rise of 0.2% m/m in June. Meanwhile, crude oil remained supported by last week’s data that the US crude inventories fell to their lowest in three years and continued underpinned demand for the commodity-linked currency – Loonie, eventually exerting some additional downward pressure on the major.
In absence of any major market moving economic releases, the USD/oil price dynamics might continue to act as key determinants of the pair’s momentum ahead of the latest Bank of Canada monetary policy update on Wednesday. The Bank of Canada is expected to raise interest rates at its meeting on Wednesday this week. On Friday the 22nd of June Canada’s CPI and Core retail sales came in softer than expected. However, the BOC discounted this weak data as a one off on the 27th of June. Then on the 29th of June the GDP figure came in as a beat at +0.1% vs. 0.0% expected. The latest data released on Friday was, on net, a tad soft with the Trade balance and employment data. However, the bottom line is that hike expectations are still on for Wednesday’s 1500BST meeting.
A follow-through selling below the 1.3065-60 immediate support has the potential to continue dragging the pair further towards its next major support near the key 1.30 psychological mark, coinciding with 50-day SMA. On the flip side, any meaningful up-move beyond the 1.3100 handle now seems to confront fresh supply near the 1.3140-45 regions, above which the pair is likely to aim towards reclaiming the 1.3200 round figure mark. Trade war tensions continue to rule the market albeit with lesser impact than it had a week earlier as Canada has enforced retaliatory tariff worth $12.8 Billion in response to US Steel and Aluminum import tariffs as Trump continues his America First attitude.
This article was originally posted on FX Empire
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