- USD / CAD gains strong continuation traction for the fourth day in a row on Thursday.
- Wednesday’s upbeat FOMC minutes and COVID-19 jitters continue to benefit the safe-haven USD.
- The decline in crude prices weighs on the CAD and provides an additional boost to the pair.
The pair USD / CAD has captured new purchases during the European session of the jeuves and has reached the highest level since April 21, around 1.2570 in the last hour.
A combination of supporting factors has helped the USD / CAD pair to take advantage of this week’s strong move higher and gain positive traction for the fourth day in a row Thursday. The US dollar has held firm near three-month highs and has held supported by signs that the Fed is moving towards tightening its monetary policy as early as this year. Apart from this, the recent sharp decline in crude prices has weighed on the CAD, a currency pegged to commodity prices, and provided an additional boost to the pair.
Minutes from the June FOMC meeting released Wednesday revealed that authorities expect that the conditions to reduce the pace of asset purchases could be fulfilled earlier than previously anticipated. Fed officials also agreed that they should be ready to act if inflation or other risks materialize, suggesting that QE discussions could begin in the coming months. USD bulls did not appear to be affected by the continued decline in US Treasury yields and took cues from the prevailing risk-off sentiment.
Concerns about the economic consequences of the spread of the Delta variant highly contagious coronavirus have continued to weigh on investor sentiment. This has been evident by a sharp decline in US stock market futures, which has been seen as another factor that has benefited the safe haven USD and it has acted as a tailwind for the USD / CAD pair.
In the meantime, oil prices have fallen further from the highest intraday level since November 2014 amid concerns that the United Arab Emirates (UAE) will unilaterally increase its production following a clash with Saudi Arabia. It is worth remembering that the UAE opposed an extension of production brakes until the end of 2022 from the current April 2022 deadline. Uncertainty about how the OPEC + stagnation will affect future oil production has continued weighing on the black gold.
Aside from this, Thursday’s strong bullish move could be further attributed to some technical buying following a sustained move past the key psychological level of 1.2500. As the USD / CAD pair this week has confirmed a breakout above short-term descending resistance, the subsequent force has set the stage for further gains. Some continuation buying beyond the 1.2560 horizontal barrier will reassert the constructive setup and allow the bulls to regain the 1.2600 level.
Market participants are now awaiting the release of US initial weekly jobless claims data, which will be released at the start of the American session today. This, coupled with broader market risk sentiment, will drive demand for USD and could generate some momentum for USD / CAD. The US economic calendar also includes the release of crude inventory data by the Energy Information Administration, which could influence oil price dynamics and allow investors to seize some short-term opportunities.
USD / CAD technical levels
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