- USD/CAD gains some positive traction on Wednesday amid fresh buying around the dollar.
- A further rise in US bond yields and a softer risk tone rekindle safe-haven demand for the dollar.
- Rising oil prices benefit the CAD and limit the pair’s gains.
The pair USD/CAD it has attracted some buying near the 1.2425 area on Wednesday and has reversed some of the previous day’s decline to its lowest level since April 21st. The pair maintains its modest intraday gains during the first part of the European session, although seems to have a hard time capitalizing on the positive intraday move beyond the 1.2550 area.
The US dollar was in demand again amid a nice rally in US Treasury yields and turned out to be a key factor offering some support to the USD/CAD pair. In fact, benchmark 10-year US government bond yield topped 3.0% againclosing in on nearly four-week highs hit earlier this week amid concerns over persistent inflation.
Investors remain concerned that the global supply chain disruption caused by the Russian-Ukrainian war continues to drive up consumer prices. This could force the US central bank to tighten its monetary policy at a faster pace. Therefore, the market’s attention will remain focused on the latest US consumer inflation figures, due for release on Friday.
Meanwhile, doubts that central banks can raise interest rates to curb inflation without affecting economic growth dampened optimism in the markets. This was another factor that benefited the dollar as a safe haven, although the increase in oil prices benefited the CADlinked to commodity prices, and limited the advance of the USD/CAD pair.
No economic data of importance to the market will be published on Wednesday, neither in the United States nor in Canada. Therefore, US bond yields coupled with general market risk sentiment will drive demand for the USD and provide some lift to the USD/CAD pair. Apart from this, investors will follow the dynamics of oil prices to take advantage of some short-term opportunities.
USD/CAD technical levels
Source: Fx Street
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