- The USD fails to regain traction despite a goodish pickup in the US bond yields.
- Positive Crude Oil prices underpinned Loonie and collaborated to the downtick.
- Wednesday’s key focus will remain on the latest BoC monetary policy update.
The USD/CAD pair traded with a negative bias through the early European session on Wednesday and retreated farther from 2-1/2 month tops set in the previous session.
The pair failed to capitalize on its early uptick on Tuesday and started retreating from an intraday high level of 1.3383 – the highest since June 19 – on the back of a sharp US Dollar pullback from multi-year tops. Against the backdrop of some renewed weakness in the US Treasury bond yields – amid uncertainty over trade talks between the United States (US) and China – failed to assist the greenback to preserve its early gains.
Adding to this, Tuesday’s awful US ISM manufacturing PMI for August increased the likelihood of an aggressive Fed rate cut move later this September and kept exerting some downward pressure on the USD, albeit the disappointing release of Manufacturing PMI from Canada helped limit further losses.
USD remains on the defensive, focus on BoC
Despite a goodish pickup in the US bond yields, the USD bulls remained on the defensive on Wednesday. This coupled with a positive trading sentiment around Crude Oil prices underpinned the commodity-linked currency – Loonie and further collaborated to some follow-through long-unwinding trade ahead of the latest BoC monetary policy update, due to be announced later during the early North-American session.
The Bank of Canada is expected to leave its key interest rate unchanged, but traders will likely scrutinize updated remarks on monetary policy outlook from BoC Governor Poloz, which might eventually provide some meaningful impetus and help determine the pair’s next leg of a directional move.
Technical levels to watch
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