- USD/CAD moves higher on Tuesday amid a nice pickup in US dollar demand.
- Aggressive rate hike expectations from the Fed and recession fears seem to benefit the USD as a safe haven.
- Demand concerns cap oil prices, weighing on the CAD and supporting the pair’s move higher.
The pair USD/CAD stops the previous day’s sharp pullback from the highest level since November 2020 and capture new purchases near the 1.3225 zone on Tuesday. The pair extends its steady intraday rise throughout the first half of the European session and is currently sitting near the daily high, just below the 1.3300 level.
A combination of supportive factors help the US dollar bounce back from the one-week low it hit earlier this Tuesday, which in turn provides a nice boost to the USD/CAD pair. Investors seem to be convinced that the Fed will maintain its aggressive monetary policy tightening stance and they have priced in at least a 75 basis point rate hike at the end of the two-day policy meeting on Wednesday. This continues to support elevated US Treasury yields, which, coupled with a shift in risk sentiment, continues to support the safe haven US dollar.
Market sentiment remains fragile due to growing fears of a recession, amid headwinds stemming from China’s covid-zero policy and the prolonged war between Russia and Ukraine. In addition, the fears that a deeper global economic downturn could affect fuel demand prevent oil prices from rising significantly. This, in turn, weighs on the CAD, currency linked to raw materials, further contributing to intraday movement in the USD/CAD pair and supporting prospects for additional gains. That said, traders might refrain from opening aggressive positions ahead of the key data/events.
The report of Canadian CPI it will be published later at the beginning of the American session and will influence the national currency. On the US economic agenda, data on the housing market stand out, with the publication of construction permits and housing starts. This coupled with US bond yields and broader risk sentiment will fuel USD demand and provide some lift to the USD/CAD pair. In addition, traders will take the dynamics of oil prices as a reference to take advantage of some short-term opportunities.
USD/CAD technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
