Home Markets USD / CAD retreats from two-month highs amid weaker USD, focus is...

USD / CAD retreats from two-month highs amid weaker USD, focus is on Canadian GDP

0
USD / CAD retreats from two-month highs amid weaker USD, focus is on Canadian GDP
  • A further drop in oil prices undermined the Canadian dollar and pushed USD / CAD to two-month highs.
  • A sharp drop in US bond yields weighed on the USD and kept any significant gains capped.
  • Investors are now looking forward to Canadian GDP, US data and Powell’s testimony to give a boost.

The pair USD / CAD it cut a portion of its intraday gains to two-month highs and was last seen trading around the 1.2770 zone, rising 0.15% on the day.

Following good two-way price movements the day before, the USD / CAD regained positive traction on Tuesday and soared to the highest level since September 22 amid a further downward stretch in crude oil prices. The detection of a new coronavirus variant, possibly resistant to vaccines, fueled concerns about the outlook for oil demand and dragged the price to the lowest level since Aug. 25. This, in turn, undermined the commodity-linked loonie and turned out to be a key factor providing a boost to the pair.

The bulls, however, struggled to find acceptance above 1.2800 amid the strongly offered tone surrounding the US dollar. The events surrounding the coronavirus saga pushed back market expectations about the likely time when the Fed would begin to tighten its monetary policy. In fact, money markets now indicate a 25 bp rate hike in September 2022 compared to July 2022 which was already discounted. This, coupled with the boost from risk aversion, caused US bond yields to drop sharply and weighed on the dollar.

Meanwhile, the USD / CAD pair has lost more than 40 pips from daily highs, although any further decline appears limited ahead of the Canadian GDP report. The key focus will be on Fed Chairman Jerome Powell’s testimony before the Senate Banking Committee and on the numbers provided by the US economic agenda.

Powell’s comments will influence market expectations of the Fed’s short-term policy outlook and boost USD demand. Apart from this, oil price dynamics will continue to be considered for some momentum and short-term trading opportunities around the USD / CAD pair.

Technical levels

.

NO COMMENTS

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Exit mobile version