05.06.202511:33 Forex Analysis & Reviews: USD/CAD. Analysis and Forecast

The USD/CAD pair continues to decline. Fundamental factors support bearish sentiment, indicating that the path of least resistance for spot prices remains downward. Reports of a trade agreement between the U.S. and Canada, which may be concluded before the G7 summit on June 15, along with yesterday's decision by the Bank of Canada to keep interest rates unchanged, continue to support the Canadian dollar. A modest rise in crude oil prices also has a positive impact on the Canadian dollar, reinforcing the negative outlook for the USD/CAD pair amid bearish sentiment toward the U.S. dollar.

Yesterday, following the release of weaker-than-expected U.S. economic data, traders increased their expectations for a Federal Reserve interest rate cut at the September meeting. This led to a drop in the yields of two-year and 10-year U.S. Treasury bonds to the lowest levels seen since May 9. Additionally, concerns about worsening fiscal conditions in the U.S. and trade uncertainties are limiting any significant strengthening of the U.S. dollar.

These negative factors suggest that any attempts at a recovery in the USD/CAD pair should be viewed as selling opportunities, which will likely be limited. Today, for better trading opportunities, attention should be paid to the release of weekly initial jobless claims in the U.S., along with speeches by influential FOMC members. This will impact demand for the U.S. dollar. Moreover, crude oil price dynamics will also create short-term trading opportunities for the USD/CAD pair ahead of key monthly employment data from both the U.S. and Canada.

From a technical standpoint, as well as a fundamental one, oscillators on the daily chart confirm the negative outlook for the pair.