- USD/CAD finds new selling on Thursday and is pressured by a combination of factors.
- US bond yield pullback and risk appetite weigh on the safe-haven USD.
- The recent recovery in oil prices benefits the CAD and also contributes to the intraday slide.
The pair USD/CAD comes under further selling pressure after an initial rally to the 1.3460 area and reverses some of the previous day’s strong rebound of around 100 pips from the weekly low. The pair remains under pressure during the first half of the European session and is currently hovering near the daily low, with bears looking for a break below the 1.3400 level.
A combination of factors triggers a sharp pullback in the US dollar from 1-month highs, which in turn puts downward pressure on the USD/CAD pair. Uncertainty about the Fed’s rate hike path drags up US Treasury yields. This, coupled with a good recovery in global risk appetite, as evidenced by the generally positive tone around equity markets, weighs heavily on the USD as a safe haven.
Meanwhile, crude oil prices remain stable near its one-week high amid optimism over a strong recovery in Chinese fuel demand. This, in turn, benefits the commodity price-linked CAD and further contributes to the selling tone surrounding the USD/CAD pair. That being said, fears of a deeper global economic recession could limit the rise of the black gold. Apart of this, the divergence in the outlook for monetary policy between the Fed and the Bank of Canada should limit the pair’s losses.
Fed Chairman, Jerome Powell acknowledged on Tuesday that it may be necessary to raise rates more than anticipated if the economy remains strong.. Several members of the Federal Open Market Committee echoed hawkish Powell’s view that further rate hikes are likely to be justified to fully control inflation. Besides, The Bank of Canada (BoC) is expected to be the first major central bank to pause the tightening cycle of monetary policy, after eight rate hikes in the last 11 months.
The fundamental background mentioned supports prospects for some buying to emerge at lower levels around the USD/CAD pair, warranting some caution before positioning for further losses. At the beginning of the American session, the weekly applications for US unemployment benefits will be published, which, together with the general risk sentiment, could influence the price of the dollar. Additionally, oil price dynamics could help create short-term opportunities around the pair.
Technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
