- USD/CAD witnesses an intraday trend reversal from a low of more than a week amid renewed demand for the USD.
- Prospects for further tightening by the Fed and rising US bond yields act as a tailwind for the USD.
- The EU’s proposed embargo on Russian crude benefits the CAD and limits the pair’s rise.
The pair USD/CAD has rebounded nicely from a low of over a week and has risen back above the 1.2750 level during the first half of the European session on Thursday.
A combination of factors helped the USD/CAD pair to attract some buying near the 1.2710 area on Thursday and halted this week’s sharp decline from the yearly high. Crude oil struggled to hold on to its intraday gains at a nearly three-week high and is now trading modest losses.. This, in turn, weighs on the commodity-linked CAD and acts as a tailwind for USD/CAD amid a nice pickup in US dollar demand.
Fed Chairman Jerome Powell has downplayed the possibility of a more aggressive tightening path, though he has stated that policymakers are ready to approve 50 point rate hikes at upcoming meetings. Additionally, markets are pricing in 200 basis point rate hikes for the remainder of 2022, which was evident by a further rally in US Treasury yields. coupled with concerns about rising COVID-19 cases and strict lockdowns in China, benefit safe-haven USD.
The USD/CAD rises more than 50 pips from daily low, but lacks continuation buying. The European Union’s proposal to eliminate Russian supplies of crude oil within six months and derivatives by the end of the year acted as a tailwind for black gold. This, in turn, prevents investors from opening aggressive bearish positions around the CAD and limits any further gains for the USD/CAD pair, at least for now.
Market participants now await the US economic calendar, with the release of the usual US initial jobless claims data. This, along with US bond yields and broader risk sentiment in the market, will influence the dollar. Investors will also take cues from the oil price dynamics to take advantage of some short-term opportunities around the USD/CAD pair. However, the focus remains on the release of the monthly US and Canadian jobs report on Friday.
USD/CAD technical levels
Source: Fx Street
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