- A combination of factors lifts USD/CAD to its highest level since June 2020 on Monday.
- Bearish oil prices weigh on the CAD and offer support amid incessant buying around the dollar.
- Investors await the Fed’s statements for some momentum and short-term trading opportunities.
The pair USD/CAD build on the momentum after last week’s breakout to the upside and gain some traction on Monday. The pair reaches its highest level since June 2020, around the 1.3640 zone during the first hour of the European session, and are supported by a combination of factors.
Crude oil prices start the new week lower and hit a new multi-month low amid concern that a deeper global economic recession affects fuel demand. This, in turn, is weighing on the commodity-linked CAD, which, along with the incessant buying around the US dollar, continues to boost the USD/CAD pair.
Last week, the Fed carried out a new interest rate hike, as expected, noting that will probably carry out more aggressive hikes in its next meetings to limit inflation. Aggressive outlooks continue to support elevated US Treasury yields and continue to support the dollar.
Indeed, the rate-sensitive 2-year US government bond yield remains near its 15-year high and the benchmark 10-year bond hits an 11-year high. Aside from this, the prevailing risk aversion environment is seen as another factor benefiting the safe haven dollar, supporting the USD/CAD pair.
Market sentiment remains fragile amid recession fears which, along with geopolitical risk, are denting global risk sentiment. Risk aversion manifests itself in a generally weaker tone around equity markets, which favors USD bulls and supports the prospects for additional USD/CAD gains.
Market participants are now awaiting speeches from influential FOMC members: Boston Fed President Susan Collins, Atlanta Fed President Raphael Bostic and Dallas Fed President Lorie Logan. This coupled with US bond yields and broader risk sentiment could weigh on the dollar and provide some lift to the USD/CAD pair. Traders will follow the dynamics of oil prices to take advantage of some short-term opportunities.
NUSD/CAD technical levels
Source: Fx Street
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