- USD/CAD is under fresh selling pressure and weighed down by a combination of factors.
- Oil price recovery benefits CAD and puts pressure amid weaker USD.
- The appearance of some buying around the 1.3400 level warrants some caution for the bears.
- The focus is on monthly Canadian GDP data and US consumer confidence.
The pair USD/CAD It is struggling to take advantage of its recent rise to a two-week high, just above the 1.3500 psychological level, and is met with further selling on Tuesday. However, the pair manages to find some support above the round level of 1.3400 and recovers to the 1.3450 zone during the first half of the European session.
The dollar’s rebound from the previous day from the 200-day SMA fades fairly quickly amid rising acceptance that the Fed will slow the pace of its tightening. Apart from this, a strong recovery in crude oil prices benefits the commodity currency CAD and puts downward pressure on the USD/CAD pair.
Crude oil prices build on the previous session’s strong recovery from the yearly low and rise around 2% amid the Speculation that OPEC will announce more supply cuts at its meeting on Sunday. However, the rise of black gold remains limited by the concern that the worsening of the COVID-19 situation in China will affect economic activity and make a dent in the demand for fuel.
Elsewhere, comments from Fed officials the day before, coupled with dovish sentiment, lend support to the safe-haven US dollar and USD/CAD. It should be recalled that St. Louis Fed President James Bullard, New York Fed President John Williams, and Fed Vice President Lael Brainard reiterated that further rate hikes were justified to combat inflation.
That said, the dovish assessment of the November FOMC meeting minutes, released last week, consolidated expectations for a relatively minor rise of 50 basis points in December. This could continue to act as a headwind for the dollar and limit gains for the USD/CAD pair. Therefore, it will be prudent to wait for the strength to hold beyond the 1.3500 level before opening any further bullish positions.
Market participants are now awaiting Tuesday’s economic agenda, which will see the release of Canadian monthly GDP data and the US Consumer Confidence Index from the Conference Board. This, along with risk sentiment, will boost demand for the dollar. Traders will follow the movement in oil prices to take advantage of some short-term opportunities around the USD/CAD pair.
USD/CAD technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
