USD/CAD trades with modest losses around mid-1.3500s amid rebounding Oil prices
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USD/CAD kicks off the new week on a softer note, though it lacks follow-through selling.
An uptick in Oil prices underpins the Loonie and exerts downward pressure on the major.
A modest USD strength might hold back bears from placing aggressive bets and limit losses.
The USD/CAD pair struggles to capitalize on Friday's strong intraday rally of over 100 pips and trades with a mild negative bias around mid-1.3500s during the Asian session on Monday. The downtick is sponsored by a modest rise in Crude Oil prices, though a combination of factors should help limit deeper losses.
Crude Oil prices move away from the lowest level since June 2023 touched on Friday amid the forecast of a potential hurricane approaching the northwestern US Gulf Coast, which accounts for 60% of US refining capacity. This, in turn, is seen underpinning the commodity-linked Loonie and exerting some downward pressure on the USD/CAD pair. That said, a weaker Canadian jobs report released on Friday raised hopes for additional interest rate cuts by the Bank of Canada (BoC) and should cap gains for the domestic currency.
Meanwhile, Friday's mixed US employment details provided evidence of a sharp deterioration in labor market. This, along with reduced bets for a larger interest rate cut by the Federal Reserve (Fed), tempers investors' appetite for riskier assets and drives some haven flows towards the US Dollar (USD). This might further hold back traders from placing aggressive bearish bets around the USD/CAD pair, making it prudent to wait for strong follow-through selling before positioning for any further depreciating move.
Moving ahead, there isn't any relevant market-moving economic data due for release on Monday, either from the US or Canada, leaving the USD at the mercy of the broader risk sentiment and the US bond yields. Apart from this, Oil price dynamics should influence the Canadian Dollar (CAD) and contribute to producing short-term trading opportunities around the USD/CAD pair.
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