Ella 
USD/CAD attracted some bargain hunting on Thursday, moving away from the previous day’s one-week low near 1.3785. Spot prices are currently trading around the 1.3815-1.3820 range, seemingly gaining support from a strong pickup in US dollar demand.
The U.S. dollar index (DXY), which tracks the greenback against a basket of currencies, rebounded from near three-week lows hit after Wednesday’s FOMC policy decision. However, the dollar’s upside appears to be limited as the Federal Reserve’s dovish outlook suggests it may cut interest rates early if inflation is in line with expectations.
Indeed, the U.S. central bank acknowledged recent progress on inflation and cooling labor markets, opening the door to an upcoming rate-cutting cycle in September. This has dragged U.S. Treasury yields to multi-month lows and, combined with an overall positive risk tone, should limit gains in the safe-haven U.S. dollar and be bearish for USD/CAD.
Meanwhile, crude oil prices fell into consolidation after strong gains the day before as tensions in the Middle East risked further escalation, which continued to fuel concerns about supply disruptions in major oil-producing regions. This in turn would support the commodity-linked Canadian dollar and limit USD/CAD upside, so bullish traders will need to be cautious.
On Thursday, neither the United States nor Canada will release any relevant market economic data, and spot prices will be affected by the dynamics of the US dollar and oil prices. Meanwhile, market focus remains on Friday’s closely watched U.S. monthly employment data, commonly known as the non-farm payrolls report (NFP).
