The U.S. dollar edged lower against the Canadian dollar on Wednesday, approaching the 1.3850 mark after the Federal Reserve’s Beige Book report pointed to slowing economic activity across several districts. The release, which offered a cautious view of consumer spending and business sentiment, weighed on the greenback and pushed traders toward more defensive positioning.
USD/CAD slipped to around 1.3852 in late trading, giving back earlier gains as market participants reacted to signs of economic moderation in the U.S. The Fed’s report cited weaker demand in both goods and services, along with softer labor market conditions and growing concerns from businesses about future outlooks.
The loonie also gained modest support from steady oil prices, which helped offset global risk aversion and supported the commodity-linked currency. While crude remains volatile, its relative stability this week provided a tailwind for the Canadian dollar, which often tracks energy markets closely.
Still, the broader move was driven by shifting expectations for Federal Reserve policy, with the Beige Book adding to the case for rate cuts later this year. Treasury yields declined following the report, reinforcing the idea that the Fed could turn more dovish if data continues to soften through the second quarter.
Technical levels show USD/CAD testing short-term support near 1.3840, with resistance now capped near 1.3900. Unless U.S. data improves or oil prices decline sharply, the pair could remain range-bound or drift lower in the near term.
For now, traders are watching upcoming inflation and employment figures for further clues on Fed direction. The dollar’s momentum has stalled, and with no immediate catalyst to revive bullish sentiment, pressure could remain on the downside against the Canadian dollar.
