USD/CAD meets with a fresh supply on Friday and is pressured by a combination of factors.
US fiscal concerns, US-China trade tensions, and dovish Fed expectations weigh on the USD.
Reduced bets for a June BoC rate cut underpin the CAD and exert pressure on spot prices.
The USD/CAD pair attracts fresh sellers following the previous day's brief pause and slides to the 1.3825 area during the Asian session on Friday. Spot prices remain close to a two-week low touched on Wednesday and seem vulnerable to weaken further amid a broadly weaker US Dollar (USD).
Traders ramped up their bets for further interest rate cuts by the Federal Reserve (Fed) following last week's softer US Consumer Price Index (CPI) and the Producer Price Index (PPI). Adding to this concerns that US President Donald Trump's dubbed “Big, Beautiful Bill” would worsen the budget deficit at a faster pace failed to assist the USD in building on Thursday's mostly upbeat US data-inspired gains. This, in turn, is seen as a key factor exerting some downward pressure on the USD/CAD pair.
Meanwhile, Crude Oil prices stall this week's retracement slide from a nearly one-month peak as the uncertainty over US-Iran nuclear talks eases oversupply concerns fueled by reports that OPEC+ is discussing a production increase for July. Adding to this, diminishing odds for a Bank of Canada (BoC) interest rate cut in June, bolstered by hotter Canadian core inflation figures released on Tuesday, underpin the commodity-linked Loonie and contribute to the USD/CAD pair's downfall.
The aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains on the downside. Even from a technical perspective, this week's breakdown through a short-term trading range support near the 1.3900 mark validates the near-term negative outlook for the USD/CAD pair and supports prospects for a further depreciating move. Traders now look to Canadian monthly Retail Sales figures and New Home Sales data from the US for a fresh impetus.
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