- A combination of supportive factors pushes USD/CAD higher for the second day in a row.
- Weakening oil prices weigh on the CAD and offer support to the pair amid a modest USD rally.
- Recession fears weigh on investor sentiment and appear to benefit the USD as a safe haven.
The pair USD/CAD builds on the previous day’s bounce, from its lowest level since June 10, and gains traction for the second day in a row on Tuesday. Momentum leads to torque a maximum of four days, around the zone of 1.2875-1.2880 during the European session, although there is no continuity.
Oil prices remain on the defensiveclose to a minimum of two and a half weeks, what continues to weigh on the CAD, a currency linked to commodity prices, and acting as a tailwind for the USD/CAD pair. The worsening global economic outlook, coupled with the recent outbreak of COVID-19 in Chinaraises concerns about fuel demand and weighs on black gold.
On the other hand, the US dollar staged a modest rebound from its lowest level since July 5, offering additional support to the USD/CAD pair. Market Sentiment Remains Fragile Amid Recession Fears and rising diplomatic tensions ahead of US House Speaker Nancy Pelosi’s planned visit to Taiwan. This, in turn, benefits the US dollar as a safe haven.
The monetary flow of risk aversion, together with expectations that the Fed will not raise interest rates as aggressively as estimated, continued to drag US Treasury bond yields lower. This could prevent dollar bulls from positioning themselves for a further recovery and limit a significant upside for the USD/CAD pair, at least for now.
Market participants now await the release of US JOLTS job openings data. This coupled with US bond yields and broader risk sentiment could weigh on the dollar and provide some lift to the USD/CAD pair. Additionally, traders could follow the oil price dynamics to take advantage of some short-term opportunities around the USD/CAD pair.
USD/CAD technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
