- USD/CAD attracts some buying at lower levels on Tuesday and is supported by a combination of factors.
- Weaker crude oil prices weigh on the CAD and act as a tailwind amid sustained USD buying.
- The pullback in US bond yields prevents the bulls from opening aggressive positions and caps the pair’s gains.
The pair USD/CAD has recovered more than 50 pips from the daily low and has touched a new intraday high, around the region of 1.2745during the first half of the European session on Tuesday.
A combination of factors helped the USD/CAD pair to attract some buying near the region of 1.2685 on Tuesday and turned positive for the fourth day in a row. Crude oil prices have hovered near a two-week low amid concerns renewed COVID-19 restrictions in China will hamper fuel demand.. This, in turn, weighed on the commodity-linked Canadian dollar and acted as a tailwind for the pair amid strong underlying bullish sentiment surrounding the US dollar.
The market’s conviction that the Fed would tighten its monetary policy at a faster pace to reduce inflation, coupled with prevailing risk-off sentiment, pushed the USD to a more than two-year high. The investors they now expect the US central bank to raise interest rates by 50 basis points at each of the next four meetings FOMC in May, June, July and September. Apart from this, concerns about slowing global economic growth benefit investors’ appetite for perceived riskier assets.
That said, the current decline prevents USD bulls from opening aggressive positions and caps any further gains for the USD/CAD pair, at least for now. This makes it prudent to wait for some continuation buying before positioning for any additional short-term moves higher. Investors now await the US economic calendar, with the release of the Conference Board Consumer Confidence Index and Durable Goods Orders.
Aside from this, US bond yields coupled with broader market risk sentiment will weigh on the USD and provide some lift to the USD/CAD pair. Investors will also take cues from oil price dynamics to take advantage of some short-term opportunities.
USD/CAD technical levels
Source: Fx Street
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