- USD/CAD attracted fresh selling on Wednesday and fell for the fourth day in a row.
- Rising oil prices underpinned the loonie and put some downward pressure on the pair.
- Falling US bond yields capped the dollar and gave it no support ahead of the Fed’s Powell meeting.
The pair USD/CAD struggled to capitalize on its modest intraday gains and was met with fresh offers near the 1.2890 area on Wednesday. The intraday decline – marking the fourth consecutive day of decline – dragged the pair to a fresh daily low around the 1.2850-1.2845 zone during the mid-European session.
Crude prices reversed an intraday decline and soared to a fresh 1-1/2-week high amid concerns about tight global supplies offsetting fears of a weakening global economy. The economic powers of the Group of Seven (G7) agreed on Tuesday to study the possibility of limiting the prices of imports of Russian oil and gas. In addition, Saudi Arabia and the United Arab Emirates would not be able to significantly increase production to compensate for the loss of Russian supply. This, in turn, acted as a tailwind for oil, underpinning the commodity-linked loonie and limiting the USD/CAD pair’s rise.
Elsewhere, a further decline in US Treasury yields prevented dollar bulls from making aggressive bets. This was seen as another factor that put some downward pressure on the USD/CAD pair. However, the prevailing cautious mood in equity markets – amid growing recession fears – continued to support the greenback as a safe haven and should limit further losses for the currency. Traders may also be reluctant to make aggressive bets ahead of Fed Chairman Jerome Powell’s speech at the ECB forum in Sintra, Portugal, later in the early American session.
As market participants remain divided on the prospects for more aggressive rate hikes from the Fed, Powell’s comments will be scrutinized for clues on the path of policy tightening. This will play a key role in driving demand for the dollar in the short term. Additionally, traders will reference oil price dynamics to determine the next leg of a directional move for the USD/CAD pair.
Technical levels
Source: Fx Street
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