USD/CAD remains on the defensive around 1.3400 mark, seems vulnerable amid weaker USD – by hareshmenghani USDCAD Fed Bonds China Currencies
The US Dollar languishes near a multi-month low in the wake of dovish comments by Federal Reserve Chairman on Wednesday and acts as a headwind for the USD/CAD pair. In fact, Powell sent a clear message that the US central bank will soften its stance and said that it was time to moderate the pace of interest rate hikes. This leads to an extension of the recent sharp decline in the US Treasury bond yields and keeps the USD bulls on the defensive.
Apart from this, the risk-on mood - as depicted by a positive tone around the equity markets - is seen as another factor weighing on the safe-haven Greenback. That said, a modest retracement inprices from a one-week high touched on Wednesday undermines the commodity-linked Loonie and lends support to the USD/CAD pair. The likelihood that OPEC+ will leave output unchanged at its meeting on Sunday and demand concerns act as a headwind for the black liquid.
Nevertheless, the underlying bearish sentiment surrounding the USD suggests that the path of least resistance for the USD/CAD pair is to the downside. This, in turn, supports prospects for an extension of this week's sharp pullback from the vicinity of mid-1.3600s, or the highest level since November 4 set on Tuesday. Hence, any attempted recovery could be seen as a selling opportunity and runs the risk of fizzling out rather quickly.
Market participants now look forward to the US economic docket, highlighting the release of the Fed's preferred inflation gauge - the Core PCE
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