The USD/CAD currency pair rebounded from the 1.4300 region, recovering from its lowest point in over a week as of Thursday. However, the pair may face challenges in achieving a significant recovery due to persistent US Dollar (USD) selling pressure. This downward trend is fueled by the US Dollar Index (DXY) hitting its lowest level since early November, primarily influenced by increasing speculation that the Federal Reserve (Fed) may implement multiple interest rate cuts in 2025.
Contributing to the USD's decline, US private sector employment saw limited growth, with only 77,000 jobs added in February, falling short of the 140,000 expected, as reported by the Automatic Data Processing (ADP). This weak job growth has intensified concerns regarding the strength of the US economy, further dampening the dollar's appeal.
In contrast, the Canadian Dollar (CAD) finds support amid expectations that the Bank of Canada (BoC) will likely pause rate cuts at its upcoming policy meeting later this month. This pause is anticipated following a slight uptick in domestic consumer inflation, adding confidence to CAD investors. Additionally, rebounding oil prices bolster the Loonie, exerting further pressure on the USD/CAD pair.
The 1.4300 mark serves as a critical support level for the USD/CAD pair. A breach below this threshold could escalate the pair's decline towards the 1.4255 intermediate support and potentially move towards sub-1.4200 levels. Conversely, the 1.4470-1.4475 horizontal barrier presents a notable resistance level. Breaking above this point could propel the pair towards the 1.4500 psychological mark and further to the 1.4545 area.
The USD/CAD pair's movements will also be shaped by upcoming economic data releases and geopolitical influences. The release of Weekly Initial Jobless Claims data from the US and Canada's Ivey PMI will provide further insights into economic conditions in both countries, impacting currency demand. Moreover, speeches from influential Federal Open Market Committee (FOMC) members are anticipated to play a significant role in determining USD demand.
Considering these factors, traders should closely monitor oil price dynamics, which are expected to create short-term trading opportunities around the USD/CAD pair. Oil prices have historically played a crucial role in influencing CAD values due to Canada's substantial oil exports.
The current market environment suggests that the USD/CAD pair may struggle to register any meaningful recovery amid prevailing US Dollar selling bias. If it fails to break above key resistance levels, there remains potential for the pair to slide further towards critical support points.