- USD/CAD attracts some buying on dips on Monday and is supported by a combination of factors.
- The pullback in oil prices weakens the Loonie and provides support amid modest USD strength.
- Bets on smaller Fed rate hikes limit USD recovery and act as a headwind for major pairs.
The pair USD/CAD It oscillates between tepid gains and minimal losses in the American session, and is currently trading around 1.3400, virtually unchanged on the day.
A combination of support factors helped the USD/CAD pair attract some buyers near the 1.3350 zone, although the intraday upside peters out near the 1.3420 region. A modest pullback in crude oil prices undermines the commodity-linked Loonie and lends support to the pair. Apart from this, a softer risk tone drives safe-haven flows into the US dollar and acts as a tailwind for the pair.
Meanwhile, the dollar’s attempt to recover from its seven-month low remains constrained by increasing bets on a less aggressive tightening of monetary policy by the Fed. Indeed, markets now seem convinced that the US central bank will ease its aggressive line stance amid signs of easing inflationary pressure. In addition, last week several members of the Federal Open Market Committee were in favor of a 25 basis point rate hike in February.
With US markets closed for Martin Luther King Jr Day, the aforementioned mixed fundamental background is holding traders back from making aggressive bets around the USD/CAD pair. Also, traders are wary of the release of Canadian consumer inflation data on Tuesday, to be followed by US Consumer Price Index and Retail Sales data on Wednesday.
Meanwhile, on Monday traders will follow the dynamics of oil prices. In addition, the Bank of Canada will report on the business outlook, which could influence the Canadian dollar and help create near-term opportunities around the USD/CAD pair.
Technical levels to watch
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.
