- USD/CAD trades with negative bias for the fourth successive day amid the prevalent USD selling bias.
- Worries that Trump’s tariffs might trigger a US recession lift Fed rate cut bets and weigh on the buck.
- The overnight downfall in Crude Oil prices undermines the Loonie and lends some support to the major.
- Traders also seem reluctant to place fresh directional bets ahead of the US/Canadian jobs reports.
The USD/CAD pair remains under some selling pressure for the fourth straight day on Friday and currently trades around the 1.4070 area, down 0.15% for the day. Spot prices hang near a four-month low touched on Thursday and seem poised to heavy weekly losses, though a combination of diverging factors warrants caution for bearish traders.
The US Dollar (USD) struggles to capitalize on the overnight modest bounce from its lowest level since October amid concerns that US President Donald Trump’s tariffs might trigger a recession and force the Federal Reserve (Fed) to resume its rate-cutting cycle. This led to the overnight slump in US Treasury bond yields and kept the USD bulls on the defensive, which continues to exert downward pressure on the USD/CAD pair.
However, the risk of a further escalation of the US-Canada trade war might hold back traders from placing aggressive bullish bets around the Canadian Dollar (CAD). In fact, Canadian Prime Minister Mark Carney said on Thursday that the previously announced retaliatory tariffs will remain in effect and that Canada will impose 25% tariffs on all vehicles imported from the US that are not compliant with the USMCA trade deal.
Meanwhile, Crude Oil prices consolidated Thursday’s steep decline to a multi-week low amid worries that the widening trade war may dent global economic growth and dampen fuel demand. This could further undermine the commodity-linked Loonie and contribute to limiting the downside for the USD/CAD pair. Furthermore, traders might opt to wait for the US/Canadian jobs report and Fed Chair Jerome Powell’s speech.
