USD/CAD Price Forecast: Seems vulnerable; could test 200-day SMA near 1.4000 mark

• USD/CAD struggles to capitalize on a modest Asian session uptick to levels beyond 1.4100.
• Recovering risk sentiment and Fed rate cut bets weigh on the USD and cap spot prices.
• A fresh leg down in Oil prices could undermine the Loonie and help limit further losses.

The USD/CAD pair attracts some sellers following an Asian session uptick to levels just above the 1.4100 mark and drops to a fresh daily low in the last hour amid a modest US Dollar (USD) downtick. Spot prices currently trade around the 1.4075-1.4070 area and seem vulnerable to weaken further.

The optimism led by US President Donald Trump's announcement of a 90-day delay on reciprocal tariffs remains supportive of a strong recovery in the global risk sentiment. This, along with bets for multiple interest rate cuts by the Federal Reserve (Fed) in 2025, keeps the USD bulls on the defensive. Meanwhile, Crude Oil prices struggle to capitalize on the previous day's bounce from a four-year low, which might cap gains for the commodity-linked Loonie and act as a tailwind for the USD/CAD pair.

Meanwhile, spot prices this week repeatedly failed to move back above the 100-day Simple Moving Average (SMA) support breakpoint. The subsequent downfall and bearish oscillators on the daily chart validate the negative outlook for the USD/CAD pair. Hence, some follow-through weakness below the weekly trough around the 1.4060-1.4055 region and the 1.4030-1.4025 zone or the year-to-date low, towards the 200-day SMA near the 1.4000 psychological mark, looks like a distinct possibility.

A convincing break below the latter will be seen as a fresh trigger for bearish traders and set the stage for an extension of the recent downward trajectory witnessed over the past two months or so. However, investors might refrain from placing aggressive bets and opt to wait for the release of the US consumer inflation figures, which might provide fresh cues about the Fed's rate-cut path and influence the USD price dynamics.

In the meantime, momentum beyond the Asian session high, around the 1.4110 area, might still be seen as a selling opportunity and remain capped near the 1.4175-1.4180 region. This is closely followed by the 1.4200 round figure, above which a fresh bout of a short-covering move could allow the USD/CAD pair to aim back towards challenging the 100-day SMA, pegged just ahead of the 1.4300 mark. A sustained strength beyond the said handle might shift the near-term bias in favor of bullish traders.