**USD/CAD Slides Toward 1.3720 as US Dollar Weakens Amid Easing Treasury Yields and Soft Economic Data**
*By: FXStreet, adapted and expanded with additional analysis*
The USD/CAD pair is currently under pressure, trading near 1.3720 during the early trading hours of Thursday, as the US Dollar witnesses a retreat against major currencies. The decline in the greenback is largely attributed to falling Treasury yields and mixed economic signals out of the United States. Investors are now turning their attention to upcoming economic data releases that could shape the outlook for future Federal Reserve policy decisions.
This article provides a comprehensive analysis of the USD/CAD movement, incorporates market sentiment, factors influencing the pair, and what to expect in the near term. The content is based on the original analysis by FXStreet and is further enhanced with data sourced from financial platforms including Investing.com, ForexLive, and DailyFX.
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## Current Technical Overview: USD/CAD
As of Thursday morning, the USD/CAD pair has slipped below key resistance levels and is trading close to the 1.3720 mark. This weakness aligns with a broader decline in the US Dollar Index (DXY), which dropped to the 104.90 level, retreating from recent highs. The Canadian Dollar is gaining moderate strength against the US currency in response to global risk-on sentiment and a small uptick in oil prices.
**Key Technical Levels to Watch (as of latest market data):**
– Immediate Resistance: 1.3750
– Key Support: 1.3700
– 100-day EMA: 1.3675
– RSI (Relative Strength Index): Trending lower, approaching neutral zone
The pullback in USD/CAD comes after the pair reached a recent high of 1.3790 earlier in the week. However, the gains stalled as the pair failed to break above the 1.3800 psychological barrier, prompting a sell-off amid waning demand for the greenback.
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## Key Drivers Behind USD/CAD Weakness
### 1. Softer US Dollar Sentiment
The US Dollar has come under pressure this week despite a modest start. Ongoing concerns over the strength of the US labor market and other soft economic indicators have added to investor caution. The Dollar Index (DXY), which tracks the movement of the greenback against a basket of six major currencies, lost ground toward the 104.90 level.
Factors weighing on the US Dollar:
– Soft Non-Farm Payrolls report: Job creation figures over the last few months have been underwhelming compared to expectations.
– Weak ISM Manufacturing PMI: The latest report showed continued contraction in the sector.
– Subdued consumer confidence data from the Conference Board.
These elements point to an economy that is cooling down faster than anticipated, putting pressure on the Federal Reserve to adjust its tone on interest rate hikes sooner than previously expected.
### 2. Falling US Treasury Yields
US bond yields have slipped as investors seek safe-haven assets and anticipate a pause or potential rate cut from the Fed. Treasury markets are especially sensitive to economic data, and deteriorating indicators like housing starts and inflationary pressures have led bond buyers to push yields lower.
**Recent Movements in Treasury Yields:**
– 10-year yield: Down from 4.30% to 4.18%
– 2-year yield: Eased from 4.84% to 4.72%
Lower yields decrease the attractiveness of the US Dollar for foreign investors, especially against high-yielding or stable commodity-backed currencies like the Canadian Dollar.
### 3. Momentum in Oil Prices Supporting the Canadian Dollar
Canada, being a net oil exporter, benefits when global crude prices rise, as this tends to bolster the Canadian economy and its currency. This week, West Texas Intermediate (WTI) crude prices have risen modestly, trading above $83 per barrel, aiding the CAD.
Supporting factors
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