- USD/CAD moves lower for the third day in a row on Tuesday amid widespread dollar weakness.
- A good rally in equity markets triggers some profit taking around the safe haven USD.
- The recent rally in crude oil prices benefits the CAD and also weighs on the pair.
The pair USD/CAD remains on the defensive during Tuesday’s European session and trades just below the 1.2820 level, just a few pips above a nearly two-week low.
The pair extended last week’s retracement from the 1.3075 region, or its highest level since November 2020, and fell for the third day in a row on Tuesday. The corrective descent is due to the continued profit taking of the US dollar from two-decade highs reached last Friday.
Given that markets have fully priced in a Fed rate hike of at least 50 basis points in the next two meetings, investors seem inclined to lighten their bullish positions in the dollar. Aside from this, signs of stability in the financial markets turned out to be another factor that weighed on the safe-haven USD.
On the other hand, the commodity-linked CAD was supported by the recent rally in oil prices, reinforced by the imminent European Union ban on imports of Russian crude. However, weakening global growth has raised concerns about weakening fuel demand and has acted as a headwind for black gold.
However, market participants seemed reluctant and preferred to wait for the appearance of the Fed chairman, Jerome Powellthis very Tuesday. Powell’s remarks will be sought for clues about the possibility of a 75 basis point rate hike in June, which will play a key role in boosting short-term demand for the dollar.
Meanwhile, investors will look to the US economic calendar on Tuesday, with the release of US monthly retail sales, to gain some momentum at the start of the American session. Aside from this, the oil price dynamics should produce significant opportunities around the USD/CAD pair.
USD/CAD technical levels
Source: Fx Street
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