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USD/CAD bounces away from two-week lows, rising oil caps gains

  • The onset of aggressive dollar buying helped USD/CAD trim its intraday losses.
  • Bullish oil prices continued to support the loonie and capped any significant gains.
  • Investors are now waiting for the US economic data to get some short term trade boost.

The pair USD/CAD rallied a few pips from a two-week low hit earlier this Tuesday and was last seen trading just below 1.2850, still down more than 0.25% on the day.

Rising crude oil prices have underpinned the commodity-linked loonie and dragged the USD/CAD pair lower for the third day in a row. G7 leaders agreed to study the possibility of capping prices on Russian oil and gas imports, fueling supply concerns. Elsewhere, the easing of COVID-19 restrictions in China raised hopes of demand recovery and pushed crude prices to a one-week high.

Elsewhere, the US dollar rallied strongly, snapping a two-day losing streak to hit a one-week low, amid a nice rebound in US Treasury yields. This, in turn, helped the USD/CAD pair find decent support near the 1.2820-1.2815 region and halt its intraday bearish trajectory, although any significant upside still looks elusive.

Investors were bullish on the hope that inflation is nearing its peak, which was evident in the prevailing risk appetite environment in equity markets. Lower inflation expectations also appear to have forced investors to lower their expectations of more aggressive monetary policy tightening by the Federal Reserve, which could limit dollar gains.

Therefore, it will be prudent to wait for a strong follow-up of buying before confirming that the recent pullback from the year’s high has run its course and placing further bullish bets on the USD/CAD pair. Market participants now await the US economic docket, in which the Conference Board Consumer Confidence Index and the Richmond Manufacturing Index will be released.

The data, coupled with US bond yields and general market risk sentiment, will boost dollar demand and provide some lift to the USD/CAD pair. Traders will follow oil price dynamics to take advantage of short-term opportunities around the pair. However, attention will remain focused on the OPEC+ meeting and Fed Chairman Jerome Powell’s appearance on Wednesday.

Technical levels

USD/CAD

Panorama
Last Price Today 1.2849
Today’s Daily Change -0.0030
Today’s Daily Change % -0.23
Today’s Daily Opening 1.2879
Trends
20 Daily SMA 1.2798
50 Daily SMA 1.2807
100 Daily SMA 1.2732
200 Daily SMA 1.2678
levels
Previous Daily High 1.2916
Previous Daily Minimum 1.2865
Previous Maximum Weekly 1.3039
Previous Weekly Minimum 1,289
Monthly Prior Maximum 1.3077
Previous Monthly Minimum 1.2629
Daily Fibonacci 38.2% 1.2884
Daily Fibonacci 61.8% 1.2897
Daily Pivot Point S1 1.2857
Daily Pivot Point S2 1.2835
Daily Pivot Point S3 1.2805
Daily Pivot Point R1 1.2909
Daily Pivot Point R2 1.2939
Daily Pivot Point R3 1.2961

Source: Fx Street

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