- A combination of factors help USD/CAD regain traction and break a two-day losing streak.
- Falling crude oil prices weigh on the CAD and offer support amid a stronger USD.
- Investors are now turning to Canada’s CPI for momentum ahead of Fed Chairman Jerome Powell’s testimony.
The pair USD/CAD has seen fresh buying on Wednesday and has snapped a two-day losing streak, halting its recent pullback from the yearly high around 1.3080. The positive intraday movement has extended throughout the first part of the European session and has made the pair to approach the psychological level of 1.3000 again.
The concerns about slowing global economic growth and fuel demand continued to act as a headwind for crude oil prices. Additionally, US President Joe Biden’s push to cut rising fuel costs caused a sharp drop and dragged black gold to its one-month low. This, in turn, weighed on the CAD, commodity-linked currency, which coupled with a nice pickup in US dollar demand, provided a good boost to the USD/CAD pair.
The firmness of expectations that the Federal Reserve will maintain its aggressive tightening policy to curb rising inflation continued to support the dollar. Indeed, markets are pricing in another 75 basis point interest rate hike at the next FOMC meeting in July. Also, a new wave of risk aversionas shown by the sea of red in the stock markets, further boosted the demand for the USD as a safe haven.
Market sentiment remains fragile amid doubts that major central banks can raise interest rates to curb rising inflation without hurting economic growth world. This comes amid global supply chain disruptions caused by the Russia-Ukraine war and the latest COVID-19 outbreak in China, which continued to fuel recession fears. The worsening economic outlook forced investors to take refuge in traditional safe-haven assets.
Despite the mix of supportive factors, the bulls might refrain from opening aggressive positions on the USD/CAD pair ahead of the key data/events. Highlights of Wednesday’s economic calendar include the release of the latest inflation figures from Canadian consumers, which, together with the dynamics of oil prices, will influence the CAD. However, the focus of attention will continue to be Fed Chairman Jerome Powell’s semi-annual testimony before the Senate Banking Committee.
USD/CAD technical levels
Source: Fx Street
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