Ella 
USD/CAD has started the new week on a subdued note, trading in a narrow range above the mid-1.4300s during the Asian session, at the lower end of its trading range from a week ago. Meanwhile, the fundamental backdrop suggests the path of least resistance for spot prices is to the downside.
A bullish surge in crude oil prices, on the back of positive news out of U.S.-Canada trade talks last week, is seen as supporting the commodity-linked Canadian dollar. In fact, crude oil prices hit a two-week high on the risk of further escalation of tensions in the Red Sea, especially after the United States vowed to continue its strikes against Yemen’s Houthi rebels until their attacks are stopped. This, combined with the underlying bearish sentiment surrounding the U.S. dollar (USD), validates the negative short-term outlook for USD/CAD.
The U.S. dollar index (DXY), which tracks the performance of the greenback against a basket of currencies, hovered near multi-month lows on concerns that U.S. President Donald Trump’s tariffs and retaliatory measures from other countries could hurt the U.S. economy. In addition, lower-than-expected U.S. inflation and signs of a cooling U.S. labor market could force the Federal Reserve (Fed) to cut interest rates several times this year. This has put the US dollar bulls on the defensive and further limited any rebound attempts in the USD/CAD pair.
Traders are now looking to the U.S. economic calendar – including the release of monthly retail sales and New York State manufacturing index – for some momentum late in the North American session. However, the focus will remain on the outcome of the much-anticipated two-day FOMC policy meeting on Wednesday. This will have a key impact on the US dollar and provide new directional momentum for USD/CAD. Meanwhile, bears might wait for a break below the 1.4350 support level before making fresh bets.
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