- The US dollar gains momentum during the US session amid rising US yields.
- Risk appetite moderates and oil prices fall.
- USD/CAD bounces back after Wednesday’s drop, back above 1.2500.
The USD/CAD It broke above 1.2500 and rose to 1.2521, making a new daily high. It remains near the top with a bullish tone amid a stronger US dollar.
CAD trims Wednesday gains
USD/CAD extended Wednesday’s decline in European hours and bottomed at 1.2457, the lowest level in two weeks. Yesterday, Canada’s inflation data beat expectations, with an annual rate of 6.7%, the highest since February 1991. Last week, the Bank of Canada raised the reference rate by 50 bps, and another increase is expected similar at the next meeting on June 1.
USD/CAD is accelerating to the upside, paring some of Wednesday’s losses amid a stronger US dollar. DXY turned positive and returned to 100.50, after bottoming hours ago at 99.82.
Higher US yields are pushing the dollar higher. US 10-year bonds rose from 2.85% to 2.94%, while 30-year yields rose from 2.89% to 2.98%. The sell-off in Treasuries came on the heels of comments from Fed officials. Mary Daly mentioned that they are likely to raise rates by 50bps at some meetings.
Negative pressure relieves
The recovery above 1.2505 eased the negative momentum. If USD/CAD continues to rise, next resistance is at 1.2550 followed by 1.2580. A drop below 1.2500 should put the pair back on a very short-term negative outlook. Key support lies at 1.2460 – a consolidation below would open the door for further losses and a potential drop to 1.2405 (5 Apr low).
Technical levels
Source: Fx Street
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