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Today, USDCAD continues to decline for four consecutive sessions, trading lower at around 1.3570 during the early Asian session.
This currency pair faces challenges from significant oil price increases, a trend likely linked to the ongoing military conflict surrounding the Gaza Strip.
Although Canada observed a national Thanksgiving holiday on Monday, geopolitical tensions persist, contributing to rising crude oil prices due to concerns over stability in the Middle East. This ultimately supports the Canadian Dollar (CAD), which is closely tied to oil prices.
Western Texas Intermediate (WTI) crude oil prices saw their largest increase in six months, reaching $86.01 per barrel on Monday. However, as of writing on Tuesday, the price has dropped to $84.70.
Despite the U.S. nonfarm payroll data released on Friday, the U.S. Dollar (USD) failed to make significant gains. This lack of appreciation may be linked to a drop in U.S. Treasury bond yields on Monday, with the current yield on the 10-year Treasury bond at 4.64%.
Furthermore, statements from Federal Reserve (Fed) officials the previous night led investors to downplay the likelihood of further interest rate hikes, resulting in lower U.S. bond yields. Consequently, this development is seen as weakening the value of the U.S. Dollar and posing a barrier for the Loonie currency pair.
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Dallas Federal Reserve President Lori Logan indicated that the need to raise the Fed funds rate may be diminishing, while Fed Vice Chair Philip Jefferson acknowledged the importance of the central bank proceeding cautiously with any rate hikes.
The U.S. Dollar Index (DXY) has continued to decline for five consecutive days, currently trading around the 106.00 level.
Despite the ongoing conflict between Hamas and Israel, stock markets have shown positive sentiment. This shift has reduced the appeal of the U.S. Dollar as a safe haven, putting pressure on the USD/CAD currency pair.
Investors are likely to closely monitor the FOMC meeting minutes scheduled for Wednesday. Anticipation regarding the impact of this release on expectations for the Fed's next policy moves will be a focus, potentially affecting U.S. Dollar demand.
Traders will be particularly focused on the Core Producer Price Index (PPI) report set to be released on Wednesday and the Consumer Price Index (CPI) report on Thursday. Both reports play a crucial role in assessing inflation trends and economic conditions in the United States.
Warning!
This analysis is based on fundamental and technical perspectives from trusted sources and is not a recommendation or solicitation. Always remember that this content aims to enrich reader information. Always conduct independent research regarding other forex information as a reference for your trading.
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