Ella 
USD/CAD continued the previous day’s pullback from around 1.3500, its highest level in nearly two months, and faced some selling pressure for the second day in a row on Wednesday. Under the combined effect of a variety of factors, the USD/CAD Asian market fell to around 1.3475, which is the pivot level of the 200-day simple moving average.
The U.S. Energy Information Administration cut its forecast for domestic oil production growth in 2024 in its February Short-Term Energy Outlook report released on Tuesday and eased concerns about a crude oil glut. This, combined with recent attacks on shipping by Iran-backed Houthi rebels in the crucial Red Sea, which accounts for nearly 12% of global oil trade, has provided support for WTI oil prices and, therefore, the commodity-linked Canadian dollar. On the other hand, the US dollar (USD) remains on the defensive below its highest levels since November 14, becoming another factor adding downward pressure on USD/CAD.
A pullback in U.S. Treasury yields overnight triggered profit-taking in the dollar, especially after gains following non-farm payrolls data, although hawkish expectations from the Federal Reserve should help stem further losses. Newly released U.S. macro data showed the economy was in good shape, giving the Federal Reserve more room to keep interest rates higher for longer. In addition, recent hawkish comments from several influential Fed officials have further forced investors to continue to scale back their expectations for aggressive easing in 2024. This could act as a “tailwind” to U.S. bond yields, favoring U.S. dollar bulls and providing support for the USD/CAD pair.
Additionally, daily technical indicators, while losing momentum, remain in positive territory, supporting the prospect of some bargain hunting at the lows. Looking ahead, traders are now looking to the U.S. and Canada trade balance to provide some impetus to USD/CAD ahead of Energy Information Administration data on U.S. oil inventories due later in the North American session. In addition, speeches from Federal Reserve officials will also affect the direction of the US dollar, which, coupled with oil price fluctuations, should provide new impetus for the USD/CAD currency pair.
