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  • USD/CAD struggles to shake off the bearish pressure on Tuesday.
  • The risk-on market environment continues to weigh on the greenback.
  • Rising crude oil prices boost demand for commodity-sensitive loonie.

After testing 1.3500 during the early hours of the European session, the USD/CAD staged a rebound and recovered to 1.3550 before coming under renewed bearish pressure in the last hour. As of writing, the pair was trading at its lowest level since March 9th at 1.3495, losing 0.55% on a daily basis.

The strong risk appetite on Tuesday continues to weigh on the greenback. The US Dollar Index, which tracks the USD’s performance against a basket of six major currencies, slumped to its lowest level after US stocks gained traction following a quiet start to the day. At the moment, the index is down 0.28% on the day near 97.50.

Meanwhile, the only data from the US showed that the ISM-NY Business Conditions Index improved to 19.5 in May from 4.3 in April and helped the market mood remain upbeat.

Focus shifts to BoC

On the other hand, hopes of OPEC+ extending and/or deepening the oil output cuts is supporting crude oil prices on Tuesday. With the barrel of West Texas Intermediate trading above $36 with a daily gain of around 1.5%, the loonie is preserving its strength against its rivals.

On Wednesday, the Bank of Canada will announce its interest rate decision and release the policy statement. Previewing this event, “an ongoing upbeat economic outlook may boost the loonie, while pessimism would send it down,” said FXStreet analyst Yohay Elam.

Technical levels to watch for