- A combination of factors help USD/CAD regain strong positive traction on Tuesday.
- Falling oil prices weigh on the CAD and offer support to the pair amid aggressive buying around the USD.
- Fed expectations and recession fears continue to underpin the USD as a safe haven.
The pair USD/CAD has attracted fresh buying near the 50-day SMA on Tuesday and has recovered almost 100 pips from the daily low, around the area of ​​1.2840. The pair has risen back to the region of 1.2940-1.2945 during the first half of the European session and has been favored by a combination of factors.
Crude oil prices came under renewed selling pressure and snapped a two-day winning streak to a four-day high, at amid worsening global economic outlook, which could slow recovery in fuel demand. This, in turn, weighed on the CADa currency linked to commodity prices, provided a good boost to the USD/CAD pair amid the emergence of aggressive buying around the US dollar.
Incessant speculation surrounding the Federal Reserve and rate hikes to curb rising inflation turned out to be a key factor that continued to support the dollar. Indeed, Fed Chairman Jerome Powell stated last week that the US central bank remains focused on controlling inflation and that the US economy is well positioned to withstand tighter monetary policy.
Also, an intraday swing in stock markets pushed the safe-haven US dollar to a new 20-year high. Initial optimism, sparked by news that US President Joe Biden was leaning toward a decision on lowering tariffs on goods from China, quickly faded amid concern about a recessionwhich continued to weigh on investor sentiment.
The fundamental background supports the prospects for further gains in the pair, although the bulls might prefer to wait for a further catalyst from the FOMC meeting minutes due on Wednesday. In addition, the monthly NFP employment report for the US and Canada will be released on Friday to determine the short-term trajectory of the USD/CAD pair.
USD/CAD technical levels
Source: Fx Street
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