On Monday, the first trading day of the week, the USD/CAD pair attempted to gain significant upward momentum during the Asian session, but the European session failed to support this move, keeping prices within a familiar range amid mixed fundamental signals.
Crude oil prices started the new week on a weak note, undermining the commodity-linked Canadian dollar.
However, emerging US dollar selling pressure is restraining the bulls, thereby limiting the pair's upward potential.
Investors are increasingly convinced that, amid signs of cooling inflation and the likelihood of sluggish US economic growth in the coming quarters, the Federal Reserve may further cut interest rates. In addition, the unexpected downgrade of the US government's credit rating is also weighing on the dollar, adding further pressure to the USD/CAD pair.
On Sunday, US Vice President J.D. Vance discussed fair trade policy with Canadian Prime Minister Mark Carney, raising hopes for a potential trade agreement between the two countries. This could support the Canadian dollar and warrants caution before initiating long positions in USD/CAD.
No significant economic data releases are expected from either the US or Canada on Monday. However, speeches by influential FOMC members could influence the dollar and provide some momentum for USD/CAD. Traders should also keep a close eye on oil price dynamics, which could generate short-term trading opportunities.
From a technical standpoint, mixed oscillators on the daily chart indicate a lack of clear market direction. The nearest resistance lies at the psychological level of 1.4000, followed by the 200-SMA. On the other hand, solid support can be found at the key round number of 1.3900.
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