USD/CAD breaks 1-week highs, rising oil caps gains pending FOMC Minutes

  • The USD/CAD pair reaches one-week highs on the appearance of new dollar purchases.
  • Aggressively, Fed expectations and a softer risk tone continue to benefit the dollar.
  • Rising oil prices prop up the Loonie and cap gains ahead of FOMC minutes.

The pair USD/CAD it attracts new buying on Wednesday and hits a 1.5-week high of around 1.3500 during the first half of the European session.

A combination of support factors pushes the US dollar (USD) to a new two-month high, which, in turn, acts as a tailwind for the USD/CAD pair. Recent hawkish comments from a number of influential Federal Reserve (Fed) officials reaffirmed market expectations that the US central bank will keep interest rates higher for longer. In fact, markets have begun to price in the possibility of another 25 basis point rise in June. This, coupled with a weaker risk tone overall, further benefits the dollar as a safe haven.

Market sentiment remains fragile amid worrying signs of slowing global economic growth, especially in China, and US debt ceiling issues. Indeed, data from China last week indicated that the world’s second largest economy underperformed in April. In addition, representatives of President Joe Biden and congressional Republicans ended another round of debt ceiling talks without reaching an agreement to raise the government’s borrowing limit. This tempers investor appetite for riskier assets and prompts some safe-haven flows.

It remains to be seen, however, whether the bulls can capitalize on this move amid a further rise in crude oil prices, which tends to benefit the commodity-linked Loonie. Indeed, US West Texas Intermediate (WTI) rose nearly 2% intraday to a three-week high after Saudi Arabia’s energy minister warned that short sellers should beware of pain, fueling speculation about further OPEC+ production cuts. This, in turn, warrants some caution before placing further bullish bets on the USD/CAD pair and positioning for further gains.

Market participants may also prefer to stay on the sidelines ahead of the release of the FOMC meeting minutes, which will be released later in the US session. The Minutes will be closely scrutinized for clues as to the future path of the Fed’s rate hikes, which, in turn, will influence near-term demand for the dollar and help investors determine the next leg of a Directional move for the USD/CAD pair. In addition, the dynamics of oil prices could contribute to generate short-term trading opportunities around the main currencies.

technical levels

USD/CAD

Overview
Last price today 1.3553
Today I change daily 0.0049
today’s daily variation 0.36
today’s daily opening 1.3504
Trends
daily SMA20 1.3504
daily SMA50 1.3532
daily SMA100 1.3508
daily SMA200 1.3484
levels
previous daily high 1.3549
previous daily low 1.3485
Previous Weekly High 1.3568
previous weekly low 1.3404
Previous Monthly High 1.3668
Previous monthly minimum 1.3301
Fibonacci daily 38.2 1.3509
Fibonacci 61.8% daily 1.3524
Daily Pivot Point S1 1.3476
Daily Pivot Point S2 1.3448
Daily Pivot Point S3 1.3412
Daily Pivot Point R1 1,354
Daily Pivot Point R2 1.3576
Daily Pivot Point R3 1.3604

Source: Fx Street

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