Ella 
USD/CAD was trading within a tight range just above the key support level at 1.3650 during Monday’s Asian session. The pair struggled to find direction as the U.S. dollar steadied as the U.S. economy took a break for the Memorial Day holiday.
USD/CAD saw a sharp sell-off on Friday amid weakness in the U.S. dollar. The U.S. Dollar Index (DXY), which tracks the greenback’s value against six major currencies, fell sharply to 104.70 even as investors expected the Federal Reserve (Fed) to hold interest rates steady in a range of 5.25%-5.50% at its September meeting as well.
Traders see a slightly better than 50% chance that the rate decision will remain steady, according to the CME FedWatch tool. The odds of keeping rates unchanged rose from 38% last week. The odds rose after a surprisingly strong preliminary U.S. Purchasing Managers Index (PMI) report for May.
Meanwhile, the outlook for the Canadian dollar is also fragile as weak domestic spending increases the likelihood of a rate cut from the Bank of Canada (BOC) in its upcoming monetary policy announcement on June 5.
Statistics Canada reported on Friday that monthly retail sales fell 0.2 per cent in March. Retail sales shrank more rapidly than February’s 0.1% decline. It was the third straight month of contraction, a sign that households are struggling to absorb the consequences of higher interest rates from the Bank of Canada. Weak household consumption and continued easing price pressures underscore the need for the Bank of Canada to resume policy normalization.
