By Ketki Saxena
Investing.com – The Canadian dollar weakened against its U.S. counterpart today, as “Softer stocks have undercut CAD support to some extent on the session, with the CAD slipping back along with most high beta FX", as per analysts at Scotiabank (TSX:BNS).
Market sentiment was cautious ahead of a slew of US employment data due this week, including JOLTS tomorrow, ADP data on Wednesday and NFP data on Friday.
Investors will be closely watching the data for further insights into the Fed’s policy trajectory, particularly after a slew of commentary from Fed officials last week hinted at the potential for further policy tightening.
Investors in Canada will also be watching for the Bank of Canada’s interest-rate decision this week.
Looking ahead for the loonie, analysts at Scotiabank note that “CAD losses should remain contained ahead of Wednesday’s BoC decision (and Thursday comments from BoC DG Gravelle).”
“No change in BoC policy is expected but the Bank will want to try and temper market expectations of earlier rate cuts here, which reflect spillover effects from the US swaps curve more than domestic developments”
Traders are betting on the BoC beginning to cut interest rates in Q2 2024.
The Canadian dollar was also pressured by the price of crude, which extended declines as investors remained skeptical over the latest OPEC+ decision on supply cuts.
The US dollar meanwhile rose against a basket of major currencies, as risk-aversion drove bids for the safe haven greenback.
On a technical level for the USD/CAD pair, analysts at FXStreet write, “Monday’s pullback brings omens of US Dollar (USD) strength on the daily candlesticks, with the 200-day SMA acting as technical support just above the 1.3500 handle.”
“On the other hand, a bullish continuation of the Canadian Dollar’s recent strength will see a fresh run at September’s low bids near 1.3380.