Forex News

USD/CAD shows recovery as US Dollar index defends downside

Published by
Nonhlanhla P Dube
  • The USD/CAD pair has shown a recovery near 1.3450, with the Loonie asset aiming to recapture Tuesday’s high at 1.3465, thanks to a minor recovery in the US Dollar index (DXY).
  • Despite rising odds of a steady monetary policy announcement by the Federal Reserve for its May meeting, US Treasury yields have remained firm, and S&P500 futures have resumed their downside move, portraying further depletion of risk appetite among market participants.
  • The USD/CAD pair is expected to remain volatile in the coming days, with investors keeping a close eye on the release of key economic data, particularly the United States Employment data, as weaker-than-anticipated additions of labor could add more pressure on the USD Index ahead. Additionally, the pair is likely to remain sensitive to market sentiment towards the greenback, economic data releases, and oil prices.

The USD/CAD pair has shown a recovery move to near 1.3450 after getting faith from a minor recovery in the US Dollar index (DXY). The Loonie asset is looking to recapture Tuesday’s high at 1.3465 as US Treasury yields remained firm despite rising odds of a steady monetary policy announcement by the Federal Reserve (Fed) for its May meeting.

US government bonds have failed to attract demand despite the street anticipating an unchanged interest rate decision by the Fed ahead. The 10-year US Treasury yields have climbed above 3.35%. Also, S&P500 futures have surrendered nominal gains added in the Asian session and have resumed their downside move, portraying further depletion of risk appetite among market participants.

The USD Index has rebounded marginally to near 101.60 after printing a fresh monthly low at 101.45. The downside bias for the USD Index has not faded yet, however, growing anxiety among market participants ahead of United States Employment data is providing a short-term cushion to the US Dollar.

The USD/CAD pair is expected to remain volatile in the coming days, with investors keeping a close eye on the release of key economic data. After a decline in Job Openings and Manufacturing PMI data, there are concerns about a possible cooldown in the US labor market. While demand for labor has remained solid, rising rates are putting a burden on firms as they are facing problems in dealing with issues of higher interest obligations and tight credit conditions by the US banks.

According to estimates, the US economy has added 200K jobs in March, compared to 242K jobs added in February. Weaker-than-anticipated additions of labor could add more pressure on the USD Index ahead. On the oil front, prices are aiming to sustain comfortably above $81.00 in the Asian session, with volatility expected ahead of the release of the weekly oil inventory data by the US Energy Information Administration (EIA) for the week ending March 31.

It is worth noting that Canada is the leading exporter of oil to the US, and higher oil prices would strengthen the Canadian Dollar. Overall, the USD/CAD pair is likely to remain sensitive to market sentiment towards the greenback, economic data releases, and oil prices in the near term.

Nonhlanhla P Dube

Nonhlanhla P Dube is a senior news reporter at Rateweb. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her directly by email at nonhlanhla@rateweb.co.za

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Published by
Nonhlanhla P Dube

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