- USD/CAD sees an intraday reversal from the one-week highs reached this Wednesday.
- The rebound in crude oil prices underpins the loonie and puts pressure amid modest dollar weakness.
- Rising US bond yields could give the dollar some support and limit further losses for the pair.
The pair USD/CAD attracts some selling around 1.2900 on Wednesday and halts this week’s recovery move from its lowest level since June 10th. The pair continues to lose ground in the mid-European session and falls to the 1.2835 area in the last hour, breaking a two-day gain streak and hitting a one-week high.
The US dollar struggles to ride the overnight bounce from a multi-week low and is met with fresh supply which, in turn, puts some downward pressure on the USD/CAD pair. A nice recovery in global risk sentiment – as evidenced by a generally positive tone around equity markets – is weighing on the dollar as a safe haven.
Also, a nice rebound in oil prices undermines the commodity-linked loonie and also contributes to the offered tone surrounding the USD/CAD pair. Expectations that OPEC+ producers will keep output steady – amid fears slowing global growth will hit fuel demand – turn out to be a key factor driving crude prices.
That said, signs that the current supply shortage is easing could act as a headwind for crude prices. Aside from this, some rise in US Treasury yields, bolstered by overnight comments from several Fed officials, could rekindle demand for dollars and help limit any further losses for the dollar. USD/CAD pair.
Investors might also refrain from making aggressive bets and would prefer to wait on the sidelines ahead of this week’s important macroeconomic releases. Monthly employment data for the US and Canada will be released on Friday. The NFP report, especially, will weigh on the dollar and provide a further directional boost to the USD/CAD pair.
Meanwhile, the US ISM Services PMI will be released on Wednesday. This, coupled with US bond yields and broader risk sentiment, would boost USD demand. Additionally, traders will look to the OPEC+ meeting headlines and oil price dynamics to take advantage of short-term opportunities around the USD/CAD pair.
Technical levels
Source: Fx Street
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