The US dollar weakened against the Canadian dollar, pushing USD/CAD below the 1.4200 mark, as renewed speculation over potential Federal Reserve rate cuts dampened demand for the greenback. Investors are increasingly pricing in a more accommodative policy shift, with market sentiment turning against the dollar’s recent strength.
The dollar’s retreat follows a series of softer US economic indicators, which have raised expectations that the Fed may ease monetary policy sooner than previously anticipated. While Fed officials have signaled a data-driven approach, traders are betting that slowing inflation and moderating economic growth could lead to rate cuts later this year. As a result, the greenback has faced increased selling pressure across the board.
Meanwhile, the Canadian dollar found support from a stabilizing oil market, with WTI crude holding near $70 per barrel. As oil remains a key driver of the Canadian economy, steady energy prices have helped cushion the loonie from broader market volatility, allowing it to gain ground against the US dollar.
From a technical standpoint, USD/CAD’s break below 1.4200 suggests further downside potential, with the next key support level near 1.4150. If selling pressure continues, the pair could move toward 1.4100, while any rebound would likely face resistance around 1.4250.
Looking ahead, market participants will closely watch upcoming US inflation data and Federal Reserve commentary, which could determine whether rate cut expectations continue to build. A stronger-than-expected inflation reading could provide some relief for the dollar, while a softer print would reinforce downside risks for USD/CAD.
For now, the Canadian dollar remains firm, benefiting from dollar weakness and stable oil prices. Unless the Fed pushes back on rate cut speculation, USD/CAD may remain under pressure, with further declines possible in the near term.
