The pair remains range-bound near 1.3870 as oil-driven CAD strength clashes with USD recovery bets on Fed rate hike expectations.
The USD/CAD pair trades flat near 1.3870-1.3875, failing to extend its overnight rebound from the 1.3845 zone, the lowest since June 3 and aligned with the 200-day Simple Moving Average. Mixed market cues keep the pair confined to a narrow range during early European trading.
Crude oil prices at a two-week high, driven by US-Iran tensions over the Strait of Hormuz, and stronger-than-expected Canadian inflation data support the commodity-linked Loonie. However, a rebound in the USD, fueled by expectations of at least one Federal Reserve rate hike amid oil-driven inflation risks, limits downside for the pair.
Technical indicators signal bearish momentum, with the Relative Strength Index in oversold territory near 29 and the MACD holding below zero. The pair’s acceptance below the 50% Fibonacci retracement of its April-June rally reinforces a negative outlook, though a break below the 200-day SMA at 1.3848 is needed to confirm further declines.