- A combination of factors weighs on the USD / CAD for the third day in a row on Thursday.
- Rising oil prices benefit the CAD and put pressure amid subdued demand around the USD.
- Rising expectations of an early rate hike from the Fed acts as a tailwind for the USD and should lend support to the pair.
The pair USD / CAD has fallen to lows of more than three months during Thursday’s European session, with bears now looking extend the breakout below the round level of 1.2400.
Crude prices have been stable near multi-year highs and they have continued to support the CAD, a currency linked to commodity prices. This, in turn, has been seen as a key factor that has dragged down USD / CAD for the third day in a row Thursday amid subdued action in the price of the US dollar. US Treasury yields declined further after slightly higher than the estimated US CPI. This has been seen as a key factor that has kept the USD bulls on the defensive.
Having said that, Prospects for an early tightening of monetary policies by the Fed have helped limit any deeper losses in the USD, although they have done little to impress the bulls or lend support to the USD / CAD pair. Minutes from the FOMC’s monetary policy meeting on September 21-22 revealed that the US central bank is still on track to begin reducing its bond purchases in 2021. In addition, a growing number of policymakers they were concerned about the continued rise in inflationary pressures, which has forced investors to anticipate the probable time of a possible rise in interest rates.
Markets seem to have started to assess the possibility of an initial rate hike in September 2022 versus December 2022. This has been reinforced by a rebound in US bond yields, which should help reignite demand around the USD and act as a tailwind for the USD / CAD pair. Even from a technical perspective, the pair is succeeding in defending the soprote marked by the lower end of a four-week-old downtrend channel. This makes it prudent to wait for sustained weakness below the mentioned support before opening new bearish positions.
Market participants are now awaiting the US economic calendar, which includes the release of the IPP producer price index and initial weekly jobless claims. This, coupled with US bond yields and scheduled speeches from influential FOMC members, will drive demand for the USD. Apart from this, investors could continue to take clues from the official US crude inventory data, which will influence the dynamics of oil prices and could generate a new momentum to the USD / CAD pair.
USD / CAD technical levels
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