- A combination of factors dragged USD/CAD lower for the second day in a row.
- Rising oil prices underpinned the Canadian dollar and put pressure amid a weaker USD.
- US macro releases failed to impress USD bulls or provide any impetus.
The pair USD/CAD remained on the defensive during the early days of the North American session and was last seen trading near the daily low around the 1.2480-1.2475 region.
After an intraday rally to levels just above the psychological level of 1.2500, the USD/CAD pair fell for the second day in a row on Wednesday and came under pressure from a combination of factors. The strong tone offered around the US dollar was seen as a key factor acting as a headwind amid surging crude prices, which tends to benefit the commodity-linked Canadian dollar.
In fact, the USD added to the losses of the previous day and fell to a minimum of more than a week despite the not so encouraging geopolitical headlines. In fact, a Kremlin spokesman said they have not noticed anything that looks like progress in the negotiations. In addition, an adviser to the Ukrainian president noted that Russia transferred forces from kyiv to surround troops in the east.
Even rising US Treasury yields, buoyed by hawkish expectations from the Fed, did little to lend support to the greenback. On the economic data front, the US ADP report showed that private sector employers added 455,000 jobs in March compared to the 450,000 expected. Adding to this, the previous month’s reading was also revised higher to 486,000 from 475,000 previously reported.
The upbeat report, however, was overshadowed by a slight disappointment in the final US GDP report, which showed economic growth in the last quarter of 2021 at 7.1% versus an estimated 7.2%. This, in turn, failed to impress USD bulls or provide any lift to the USD/CAD pair, which remains within striking distance of more than a two-month low set earlier this week.
On the other hand, the Canadian dollar was supported by a sharp rise in crude oil prices. Skepticism about any progress in the Russia-Ukraine peace talks, coupled with the growing prospect of new Western sanctions against Russia, acted as a tailwind for the black liquid. That said, the imposition of new COVID-19 restrictions in China could limit commodity gains.
The mixed fundamental backdrop could prevent traders from placing aggressive bearish bets on the USD/CAD pair. This, in turn, suggests that any further slide is more likely to find decent support and attract some buying near the yearly low around 1.2450. The latter should act as a central point, which if broken decisively should pave the way for more short-term losses.
Technical levels
Source: Fx Street
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