- USD / CAD rises for the third day in a row and sets new highs in five weeks.
- Continued strength of the dollar, risk aversion and decline in oil keeps the USD / CAD boosted.
USD / CAD maintained its demand tone and reached new highs in five weeks in the European session by climbing to 1.2603. Still the pair has not been able to stabilize above 1.2600. It remains bullish near that level.
The pair rallied through a three-week-old ascending channel and rises on Friday for the third day in a row. A weaker tone around crude oil prices affects the loonie. The strength of the dollar is also added. The dollar index (DXY) spiked to a 16-month high today amid expectations that the Federal Reserve would adopt a more aggressive policy response to contain inflationary pressures. Bets for an earlier tightening of US central bank policies rose further after data released Wednesday showed consumer prices in October rose at the fastest annual pace since 1990.
In the meantime, Fed fund futures indicate that the first rate hike could occur as early as July 2022, which, in turn, continued to support high US Treasury yields. This, coupled with the cautious mood around equity markets, continued to prop up the greenback.
This follows the acceptance of the USD / CAD above the very important 200 SMA and supports the prospects for an extension of this week’s strong rally inspired by US inflation data from levels below 1.2400.
On Friday the data of the Consumer Sentiment Index (preliminary) from University of Michigan. Apart from this, US bond yields, what happens to oil and the equity market, will be key for the USD / CAD.
Technical levels
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