- USD / CAD continues its struggle to post a significant recovery from the month-long lows.
- The optimistic decision of the Bank of Canada last week and a rebound in oil prices benefit the CAD and limit the pair’s gains.
- A rally in US bond yields benefits the USD and helps limit losses ahead of the FOMC decision.
The pair USD / CAD is extending its side consolidation price action at the start of the European session on Wednesday and remains trapped within a narrow range near the 1.2400 level.
The pair, so far, has struggled to post a significant recovery and has held near the month-long lows, around the 1.2385-touched region earlier this week. The loonie has continued to benefit from the BoC’s more optimistic decision last week to reduce your weekly asset purchases. The Canadian central bank also advanced guidance for the first interest rate hike for the second half of 2022.
Apart of this, a spike in crude oil prices has further benefited the loonie and it has acted as a headwind for the USD / CAD pair. Having said that, the decline remains supported amid a modest rebound in demand for the US dollar, which has found some support in a strong rally in US Treasury yields. Upbeat US economic data on Tuesday pushed the benchmark 10-year US government bond yield above the 1.60 level. %.
In fact, Conference Board consumer confidence index jumped to pre-pandemic highs and rose to 121.7 points in April from 109.0 the previous month. The USD bulls were further inspired by continued rising inflation expectations, which could force the Fed to start laying the groundwork for a future tightening of monetary policy soon. Therefore, the key focus will remain on the FOMC’s latest monetary policy decision, scheduled to be announced later this Wednesday.
The US central bank is expected to. keep your monetary policy setup unchangedwhile Fed Chairman Jerome Powell could hold the view that the recovery is incomplete and that more support is warranted. That said, any upbeat surprises could trigger an aggressive short-hedging move around the USD and provide a strong boost to the USD / CAD pair.
USD / CAD technical levels
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