- USD/CAD sees fresh selling on Wednesday and is under pressure from a combination of factors.
- The rebound in oil prices benefits the CAD and exerts pressure amid modest USD weakness.
- Expectations for an aggressive Fed rate hike should cap USD losses and lend support to the pair ahead of US CPI.
The pair USD/CAD has weakened below the psychological level of 1.3000 and has fallen to a fresh daily low at 1.2953 during the early part of the European session on Wednesday. The pair is now trading around the 1.2965 area, losing around 0.50% on the day.
After the good price movements of the previous day, the USD/CAD pair came under new selling pressure and, for the time being, appears to have broken a four day winning streak then reach a new annual high. A good rebound in crude oil prices has benefited the CADa commodity-linked currency, and put downward pressure on USD/CAD amid modest US dollar weakness.
Oil recovered strongly from a nearly three-week low amid concern over global supply shortages due to war in Ukraine. However, the bleak outlook for global fuel demand, due to rising recession risks and strict coronavirus lockdowns in major oil importer China, should cap black gold gains, at least for the time being. moment.
Besides, the current pullback in US bond yields, coupled with the sharp rally in equity markets, caused some selling around the safe-haven US dollar. This was seen as another factor weighing on the USD/CAD pair. That said, the prospect of aggressive monetary policy tightening by the Fed should help limit deeper USD losses.
In fact, the markets seem to be convinced that the Federal Reserve will have to take more drastic measures to control inflation and are pricing in rate hikes of up to 200 basis points for the rest of 2022. So the focus will be on the latest US consumer inflation figures, due later in the session american.
The US CPI report could influence the Fed’s tightening path, which together with the general market risk sentiment, would influence the demand around the dollar. Apart from this, investors will be guided by the dynamics of oil prices to take advantage of short-term opportunities. However, the fundamental backdrop supports the prospect of some buying around the USD/CAD pair.
USD/CAD technical levels
Source: Fx Street
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