- USD/CAD is holding steady around 1.3700 as traders await updates regarding US trade discussions.
- FOMC minutes indicate that most members are not in favor of any short-term interest rate cuts.
- Canadian employment data for June is expected on Friday.
The USD/CAD pair is trading within a narrow band near 1.3700 during Thursday’s Asian session. The market seems to be in a holding pattern, as investors look for news on trade talks involving the US and its key partners, including the Eurozone, China, Canada, and Mexico.
In other news, President Donald Trump has introduced new tariffs on 21 countries that didn’t reach agreements during a designated 90-day period of mutual tariff suspension. Japan and South Korea are notable mentions, facing additional import duties of 25%.
Currently, the US Dollar Index (DXY), which measures the dollar against six major currencies, is cautiously hovering around 97.40.
Regarding monetary policy, minutes from the FOMC meeting held on June 17-18 suggest that while tariff-driven inflation could lead to policy adjustments, this contradicts President Trump’s criticisms of Fed Chairman Jerome Powell, who has been cautious about aggressive rate cuts.
In Canada, traders are keenly awaiting labor market statistics for June, which will be released on Friday.
The USD/CAD remains around 1.3700, facing selling pressures on any breakout attempts past the 20-day exponential moving average (EMA), which signals a trend of rising sell-offs.
The 14-day relative strength index (RSI) is near 50.00, reflecting a lack of strong momentum either way.
Looking ahead, the pair may drift toward psychological levels around 1.3500 and 1.3420, which were last seen on September 25th. On the flip side, if it breaks upward past the recent high of 1.3820, that could pave the way for a rise to 1.3920, noted on May 21st, and potentially 1.4000 as seen on May 15th.
USD/CAD Daily Chart
US Dollar FAQ
The US dollar (USD) is the official currency of the United States and is also widely used in several other countries. As of 2022, it is the most traded currency in the world, involved in over 88% of global forex sales, averaging about $6.6 trillion a day. After World War II, it replaced the British pound as the global reserve currency. Historically, it was backed by gold until the Bretton Woods Agreement in 1971, which marked the end of the gold standard.
The value of the US dollar is primarily influenced by the Federal Reserve’s monetary policy. The Fed’s goals include maintaining price stability—keeping inflation in check—and promoting full employment. They adjust interest rates as necessary; when inflation exceeds their 2% target, they raise rates, which can strengthen the dollar. Conversely, if inflation is low or unemployment is high, rates might be lowered, which can weaken the dollar.
In extraordinary situations, the Fed might print more dollars or implement quantitative easing (QE), a measure that increases credit flow in the financial system during times of credit shortages. This approach was notably used during the 2008 financial crisis and typically weakens the dollar.
On the other hand, quantitative tightening (QT) is when the Federal Reserve ceases to purchase bonds and doesn’t reinvest in maturing bonds. Usually, this is beneficial for the dollar.
