- USD / CAD gains positive traction Thursday and builds on the previous day’s rebound from a multi-week low.
- The pullback in oil prices weighs on the CAD and provides a modest boost to the upside in the pair amid a modest strength in the USD.
- Upbeat Fed Expectations, Rising US Bond Yields, and Cautious Market Sentiment Benefit the USD
The pair USD / CAD moves higher at the start of the American session on Thursday, reaching a two-day high near the 1.2700 level.
A combination of factors helped the USD / CAD to take advantage of the previous day’s post-BoC recovery move from near 1.2600 and gain some positive traction on Thursday. The Bank of Canada kept the interest rate at 0.25% and stuck to its guidance that the first rate hike could come in the second or third quarter of 2022. The BoC, however, warned that the variant of the Omicron coronavirus has created renewed uncertainty, which appeared to be the only factor weighing on the Canadian dollar.
In the meantime, crude oil price struggled to find acceptance above the $ 73.00 level per barrel and witnessed a modest setback from a two-week high hit early Thursday. This the CAD weighed even more, a currency pegged to commodity prices, and provided a good boost to the USD / CAD pair amid a modest pickup in demand for the US dollar. A further rise in US Treasury yields, bolstered by optimistic expectations from the Fed, coupled with cautious market sentiment extended some support to the safe-haven USD.
Investors seem convinced that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation and they have been pricing in the possibility of a rate hike in May 2022. This was seen as a key factor pushing the benchmark 10-year US government bond yield above 1.50%. Besides this, escalating geopolitical tensions It overshadowed recent optimism in the markets and acted as a tailwind for safe-haven currencies such as the USD.
Market participants will take cues from US bond yields and broader market risk sentiment, driving demand for the USD. Apart from this, the oil price dynamics should provide some boost to the USD / CAD pair. The key focus, however, will remain on Friday’s release of US CPI consumer inflation figures, which will help determine the next directional move.
USD / CAD technical levels
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