Home Daily Commentaries USD/CAD climbs back closer to mid-1.3800s amid weaker Oil prices, notable USD demand

USD/CAD climbs back closer to mid-1.3800s amid weaker Oil prices, notable USD demand

Written by Mo Makkouk
| Tuesday 6 August, 2024

Daily Currency Update

The USD/CAD pair attracts some dip-buying following an intraday dip to sub-1.3800 levels, or a one-week low and touches a fresh daily top during the early part of the European session on Tuesday. Spot prices currently trade around the 1.3835-1.3840 region and for now, seem to have stalled a sharp retracement slide from the highest level since October 2022 touched on Monday.

Against the backdrop of worries about an economic downturn in China, the incoming softer US macro data suggested that the world's largest economy was slowing faster than initially expected. This is expected to dent fuel demand and drags Crude Oil prices lower for the fourth straight day, which, in turn, is seen undermining demand for the commodity-linked loonie. Apart from this, a goodish pickup in the US dollar (USD) demand, supported by rebounding US Treasury bond yields, turn out to be a key factors acting as a tailwind for the USD/CAD pair.

Key Movers

Oil prices (WTI) down 0.32% to 72.71 and US$6.4 trillion stock wipeout has traders fearing ‘great unwind’ is just starting.

On Monday, the global flight from riskier assets intensified dramatically as concerns grew that the US may be on the brink of a recession, rattling investors and shaking financial markets. This heightened uncertainty had a significant impact on the US dollar, which initially saw a surge in value as investors sought safety in the currency.

US central bank policymakers quickly intervened, pushing back against fears that weaker-than-expected July job data signaled an impending recession. They cautioned that while the economy isn’t in freefall, the Federal Reserve may still need to cut interest rates to prevent a downturn. Such a move could weaken the dollar in the long term, as lower rates typically reduce the currency’s appeal to investors.

Expected Ranges

  • EUR/USD: 1.09041 - 1.0963 ▼
  • GBP/USD: 1.26732 - 1.28026 ▼
  • AUD/USD: 0.64723 - 0.65399 ▼
  • USD/CAD: 1.37932 - 1.3856 ▲