USD / CAD limited around the 1.2150 region

  • USD / CAD is struggling to capitalize on its intraday gains to weekly highs, around the 1.2155-60 region.
  • The bulls seem rather unimpressed by the strength of the USD inspired by the US CPI and falling crude prices.
  • A more optimistic BoC acts as a tailwind for the CAD and limits the pair’s recovery attempt.

The pair USD / CAD it is moving slightly higher during the European session on Thursday, although it has struggled to capitalize on the initial positive move to fresh weekly highs around the 1.2155-60 region. At the time of writing, the pair remains positive just below 1.2150

A combination of supporting factors has helped the pair gain some positive traction on Thursday and take advantage of the previous day’s US CPI-inspired bounce from the 1.2045 region, at a minimum of five years. Concerns about the continued increase in new COVID-19 cases in India have continued to increase the concerns about recovering fuel demand. This has been evident from a sharp drop in crude oil prices, which has weighed on the Canadian dollar, a currency pegged to commodity prices, and has offered some support to the USD / CAD pair.

On the other hand, the US dollar has been supported by the United States inflation report red-hot Wednesday, which fueled the speculation about an earlier-than-anticipated tightening by the Federal Reserve. Apart from this, the prevailing sentiment of risk aversion, as shown the spread of the sell-off on global stock markets has further boosted the safe-haven US dollar. That said, a modest pullback in US Treasury yields has prevented USD bulls from opening aggressive positions.

In the meantime, the more optimistic stance taken by the Bank of Canada has continued to act as a tailwind for the loonie. This has been seen as another factor that has not helped the USD / CAD pair to capitalize on its initial rally to weekly highs, around the 1.2155-60 region. Therefore, it will be wise to wait for some solid continuation buying before confirming that the recent downward movement is over and positioning yourself for any short-term recovery moves.

Market participants are now waiting for the US economic calendar, featuring the release of the IPP producer price index and weekly initial jobless claims, to gain some momentum. This, along with US bond yields and broader market risk sentiment, will influence the USD. Apart from this, the dynamics of the oil price will contribute to generate some trading opportunities around the USD / CAD pair.

USD / CAD technical levels

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