USD/CAD struggles to build on modest bounce from two-month low, remains below 1.4200
USD/CAD attracts some buyers at the start of a new week, though it lacks follow-through.
Bearish Crude Oil prices undermine the Loonie and act as a tailwind for the currency pair.
Subdued USD price action holds back bulls from placing aggressive bets around the major.
The USD/CAD pair kicks off the new week on a positive note and reverses a major part of Friday's slide to mid-1.4100s, or its lowest level since December 12. Spot prices, however, struggle to capitalize on the uptick and remain below the 1.4200 round-figure mark through the Asian session.
Crude Oil prices drop to a nearly two-month low amid hopes for a peace deal between Russia and Ukraine, which, in turn, could end sanctions against Russia and ease global supply disruptions. This is seen undermining the commodity-linked Loonie and turns out to be a key factor lending some support to the USD/CAD pair. That said, reduced bets for another rate cut by the Bank of Canada (BoC) in March help limit the downside for the Canadian Dollar (CAD).
Apart from this, the recent US Dollar (USD) decline further contributes to capping the upside for the USD/CAD pair. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, registered hefty losses last week amid easing worries about the potential economic fallout from US President Donald Trump's trade tariffs. Trump directed officials on Thursday to formulate plans for reciprocal tariffs, though he stopped short of announcing levies immediately.
Moreover, Friday's disappointing release of US monthly Retail Sales, which dropped by the most in nearly two years in January, keeps the USD bulls on the defensive. That said, the growing acceptance that the Federal Reserve (Fed) would stick to its hawkish stance amid still-sticky inflation acts as a tailwind for the buck and the USD/CAD pair. The fundamental backdrop, however, warrants caution before positioning for any further gains for the currency pair.
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