USD/CAD registers a new daily low on the weakness of the dollar and the rebound in oil

• USD/CAD pulls back from 1-week highs and is pressured by a combination of factors.
• A modest rally in crude oil prices underpins the Loonie and acts as a headwind for the pair.
• The dollar remains on the defensive amid bets on lower Fed rate hikes and puts pressure on.
• The dominance of the risk averse state could support the safe haven dollar and help limit losses.

The pair USD/CAD it fell during the beginning of the North American session and reached a new daily low, around the zone of 1.3480-1.3475 in the last hour.

The dollar continues to be weighed down by expectations of less aggressive monetary policy tightening by the Fed and acts as a headwind for the USD/CAD pair. In fact, investors now seem convinced that the US central bank will soften its hawkish stance and current market prices indicate a higher probability of a smaller 25 basis point rate hike in February.

Aside from this, a modest rebound in oil prices underpins the commodity-linked Loonie and further helps cap USD/CAD gains. USD bulls, for their part, do not seem impressed by the better-than-expected release of the Philadelphia Fed Manufacturing Index and weekly initial jobless claims, which do not help to provide any momentum.

That being said, concerns about a deeper global economic downturn could continue to keep oil capped. Apart from this, a new wave of risk aversion across the globe, as evidenced by the Red Sea in global equity markets, could provide some support for the dollar and USD/CAD, warranting caution from traders. bassists.

From a technical standpoint, spot prices have failed to break above the 1.3500 psychological level or consolidate momentum beyond the 100-day SMA. Therefore, it is prudent to wait for strong follow-through buying before placing further bullish bets on the USD/CAD pair and positioning for any further appreciation.

Technical levels to watch