- USD / CAD lacks a firm directional bias and remains trapped in a range on Wednesday.
- The rally in US bond yields revives demand for the USD and offers some support for the pair.
- A modest decline in crude oil prices weighs on the CAD ahead of the Canadian CPI report.
The pair USD / CAD now appears to have entered a bearish consolidation phase and oscillates in a range around 1.2350 during the European session on Wednesday.
The pair has struggled to capitalize on the late rally the day before from near the 1.2300 level, at three-month lows, and witnessed subdued and range-limited price action on Wednesday. Nevertheless, a combination of factors helped limit the decline in the USD / CAD pair, At least for the moment.
Crude prices fell after the Chinese government stepped up efforts to control record high coal prices and alleviate power shortages. The move triggered a sale of Chinese coal and other raw materials, which, in turn, triggered some profit-taking in crude prices and crude fell from multi-year highs.
The decline in oil prices weighed on the CAD, a currency pegged to commodity prices, which, along with a good pickup in demand for the US dollar, provided some support to the USD / CAD pair. The US dollar got some support from an extension of the recent strong upward movement in Treasury yields. of the United States and a softer risk tone.
US bond yields have skyrocketed amid the growing acceptance that the Fed will soon begin to reverse its huge pandemic-era stimulus. Markets also appear to have begun pricing in the possibility of a possible interest rate hike in 2022 amid fears of a faster-than-expected rise in inflation.
The prospects for an early tightening of monetary policies by the Fed pushed the benchmark 10-year US government bond yield to the highest level since May, around 1,672% on Wednesday. This was seen as a key factor that helped revive demand for the USD, although the rally lacked any bullish conviction.
The key point on Wednesday will be the release of Canadian consumer inflation figures, which will be announced at the beginning of the American session. Apart from this, the dynamics of oil prices will influence the Canadian dollar and could generate some momentum to the USD / CAD pair amid the absence of relevant economic data releases from the United States.
USD / CAD technical levels
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