- USD/CAD gains some positive traction on Thursday, although it lacks strong buying following.
- The rally in crude oil prices benefits the CAD and limits the pair’s positive intraday movement.
- Dovish Fed expectations and rising US bond yields support USD.
The pair USD/CAD fails to capitalize on its positive intraday movement on Thursday and pull back towards the 1.3600 level during the first half of the European session.
Crude oil prices reverse a modest decline and hit a nearly two week high in the last hour, which in turn benefits the CAD, a currency linked to commodity prices, and acts as a headwind for the USD/CAD pair. The rebound in oil prices, however, lacks bullish conviction amid concerns that rapidly rising borrowing costs will slow economic growth and affect fuel demand. Apart of this, a resurgence in demand for the US dollar, bolstered by hawkish expectations about the Fed, supports prospects for a significant rise in the pair.
The markets now seem convinced that the US Central Bank will keep interest rates higher for longer than expected, due to persistently high inflation. In addition, Minneapolis Fed President Neel Kashkari opened the door for a 50 basis point hike at the next meeting in March, which continues to push US Treasury yields higher. Indeed , the yield of the 10-year Government Bonds reaches its highest level since November, beyond the 4.0% level, and acts as a tailwind for the Dollar.
Besides, prevailing caution in markets, in the face of recession risks, further benefits the safe-haven USD. Apart from this, speculation that the Bank of Canada (BoC) could take a pause in the tightening cycle, bolstered by the release of a softer Canadian CPI last week, favors USD/ bulls. EXP. This, in turn, suggests that the path of least resistance for the pair is to the upside.
Market participants are now awaiting the release of weekly US jobless initial claims data, which will be released later in the American session. These data, coupled with US bond yields and broader risk sentiment, will boost demand for the dollar and provide some lift to the USD/CAD pair. Traders will also follow oil price dynamics to take advantage of some short-term opportunities.
USD/CAD 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.
