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USD/CAD chart showing downtrend and approaching 200-day SMA support

USD/CAD nears 2-month low as bears target 200-day SMA below 1.3400

The USD/CAD pair is under selling pressure for the fourth consecutive day, dropping to a nearly two-month low on Thursday. Bears are eagerly awaiting a breakthrough of the important 200-day Simple Moving Average (SMA) before placing fresh bets.

The US Dollar (USD) has been facing consistent selling pressure for the past three days due to expectations of an imminent pause in the Federal Reserve’s (Fed) rate-hiking cycle. This has put downward pressure on the USD/CAD pair. Markets believe that the US central bank will pause its monetary tightening after hiking one last time next month. This expectation was reaffirmed by the softer-than-expected US Producer Price Index (PPI) figures released on Thursday.

The PPI declined to a 2.7% YoY rate in March from the previous 4.9%, while the annual Core PPI fell to 3.4% during the reported period from 4.5%, matching analysts’ estimates. This has raised hopes that disinflation is progressing smoothly and has opened the door for the Fed to cut rates in the second half of the year.

Moreover, the FOMC minutes for March revealed that several policymakers considered pausing interest rate increases after the failure of two regional banks. This, coupled with a generally positive tone around the equity markets, continues to weigh on the safe-haven Greenback and is dragging the USD/CAD pair lower. However, a modest pullback in oil prices has undermined the commodity-linked Canadian dollar (CAD) and is helping to limit any further losses for the USD/CAD pair.

USD/CAD chart showing downtrend and approaching 200-day SMA support

In summary, the USD/CAD pair is currently facing a bearish trend due to expectations of a Fed rate-hike pause and weakening US economic data. Keep an eye on the 200-day SMA, as a subsequent breakthrough could lead to further losses for the pair.

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