- The USD / CAD sees some selling on Thursday and returns a portion of the previous day’s gains.
- The emergence of profit taking around the USD appears to be the only factor putting downward pressure.
- The optimistic expectations from the Fed should help limit any significant declines for the USD and the pair.
The pair USD / CAD remains under pressure during Thursday’s European session, moving towards the lower end of its daily trading range around the region of 1.2720.
The pair has struggled to capitalize on this week’s good bounce from levels below 1.2600 and has seen some selling on Thursday, breaking two consecutive days of winning streak. The pullback from the weekly highs lacks any obvious fundamental catalyst and is likely to be limited amid the prevailing bullish sentiment around the USD.
The USD has been gaining strong positive traction amidst the firm market expectations that the Fed will begin reversing its huge pandemic-era stimulus as early as November. In addition to this, markets also appear to have begun pricing in the possibility of a Fed rate hike in 2022, which has been evident from the recent surge in U.S. Treasury yields.
Having said that, risk appetiteAs evidenced by a strong upward move in the stock markets, it has prompted the USD bulls to pull back some gains. In fact, the DXY index has witnessed a modest pullback from the highest level since September 2020 touched on the previous day. This, in turn, has been seen as a key factor that has put some downward pressure on the USD / CAD pair.
In the meantime, a subdued action around oil prices has done little to influence the CAD, currency pegged to commodity prices, or provide any significant boost to the USD / CAD pair. With price dynamics around the USD proving to be the sole driver of the intraday move, prospects for an early tightening of monetary policies by the Fed should help the pair attract some lower buying.
Market participants are now awaiting the US economic calendar, highlighting the final release of GDP and initial weekly jobless claims. Apart from this, the testimony of Fed Chairman Jerome Powell before the Financial Service Committee and US bond yields will influence the USD. Investors could also continue to take indications of oil price dynamics for some opportunities around the USD / CAD pair.
USD / CAD technical levels
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