Ella 
USD/CAD extended losses after retreating from an eight-month high of 1.3865 on Monday, trading around 1.3840 during the Asian session on Wednesday. A recovery in crude oil prices has supported the commodity-linked Canadian dollar against the U.S. dollar, as Canada is the largest crude exporter to the United States.
At press time, West Texas Intermediate (WTI) crude oil prices were around $75.40 per barrel. WTI rebounded from an eight-week low of $74.24 recorded on Tuesday amid rising geopolitical tensions in the Middle East.
The Israeli government claimed to have killed Hezbollah’s most senior commander in an airstrike in Beirut on Tuesday in retaliation for Saturday’s cross-border rocket attack on Israel. Reuters reported that the conflict escalated despite diplomatic efforts by U.S. and United Nations officials to prevent a major conflict that could inflame the broader Middle East.
Shaun Osborne, chief currency strategist at Scotiabank, noted that the Canadian dollar is battling a wave of negative sentiment. “The latest CFTC positioning data shows a significant increase in bearish positioning in the Canadian dollar. While bearish positioning appears to be overdone, the weak sentiment largely reflects the Bank of Canada’s easing bias. ”
On the data front, Canada’s May gross domestic product (monthly) data is scheduled to be released on Wednesday. In terms of the U.S. dollar, the Federal Reserve is expected to keep interest rates unchanged at its meeting later in the North American session.
However, growing expectations for a rate cut in September have put downward pressure on the dollar. In addition, signs of cooling U.S. inflation and easing labor market conditions have further fueled expectations that the Federal Reserve will cut interest rates multiple times this year, with the total number of interest rate cuts possibly reaching three. The CME FedWatch tool shows a 100% chance of a rate cut of at least 25 basis points in September.
