- USD / CAD falls to the lowest level since April 2018 at the start of the European session on Thursday.
- Powell’s pessimistic comments and risk appetite continue to weigh on the safe-haven USD.
- Rising crude oil prices benefit the CAD and put even more pressure on the pair.
The pair USD / CAD has fallen to new lows of various years to the start of the European session, with bears expecting sustained weakness below the key psychological level of 1.2500At the time of writing, the pair remains under heavy pressure at the daily lows zone, around 1.2495.
The pair has extended this week’s losses and remained under pressure during the first half of trading action on Thursday. Fed Chairman Jerome Powell’s assurance that interest rates to stay low for a long time has kept the US dollar bulls on the defensive. Apart from this, the continuation of Upward movement in crude oil prices has benefited the Canadian dollar, a currency linked to commodity prices, and has put some pressure on the USD / CAD pair.
During his second day of testimony before the House Financial Services Committee on Wednesday, Powell showed his commitment to the current ultra-flexible monetary policy and he reiterated that the Fed has no plans to reduce money printing or increase interest rates in the short term. Powell too calmed fears about inflation and said it will only start to worry if prices start to rise persistently and worryingly.
Powell’s comments gave new impetus to reflation trading, which remained underpinned by growing optimism about a strong global economic recovery. Progress on COVID-19 Vaccines and US President Joe Biden’s Proposed $ 1.9 Trillion Stimulus Package they have continued to support underlying bullish sentiment in financial markets. This has been seen as another factor hurting the safe haven USD.
Meanwhile, the 10-year US government bond yield has held near its one-year highs, although it has done little to provide respite for USD bulls. The USD / CAD pair has been further pressured by the recovery of crude oil prices. In fact, WTI prices are moving higher for the fourth day in a row and have reached their highest levels in more than 13 months amid expectations of a strong recovery in global fuel demand.
Market participants now await the US economic calendar, highlighting the preliminary release of fourth quarter GDP (second estimate). This, along with US durable goods orders data and speeches from influential members of the FOMC, will influence the USD and could generate some significant trading opportunities around the USD / CAD pair.
USD / CAD technical levels
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