- USD/CAD gains some positive traction on Tuesday, though it lacks bullish conviction.
- The pullback in crude oil prices weigh on the CAD and offer support for the pair.
- The current USD retracement from a multi-month high limits any further advance in the pair.
- Traders also seem reluctant, preferring to wait for the US CPI release.
The pair USD/CAD It attracts some buyers near the 1.3330 zone on Tuesday and holds its modest intraday gains through the early part of the European session. The pair is currently near the daily high, around the 1.3345 area and, for now, it appears to have snapped a two-day losing streak to fall to a one-week low hit on Monday.
Weak Oil Prices Weigh on CAD, a currency linked to commodity prices, which in turn favors USD/CAD. The Biden Administration announced Monday that will sell 26 million barrels of crude from the Strategic Petroleum Reserve as part of a publication mandated by Congress. This comes amid concerns about weakening demand, amid pressure on economic activity from rising interest rates and inflation, and weighs on black gold.
However, USD/CAD upside remains capped by US dollar pullback from the multi-week high hit the previous day. A further decline in US Treasury yields appears to be the only factor putting downward pressure on the dollar. Having said that, expectations that the Fed will stay hawkish for longer should limit the fall in US bond yields. Also, recession fears should limit losses for the safe-haven USD.
Traders may also refrain from aggressively short USD on the risk of a stronger US CPI for January. Speculation was bolstered by the Labor Department’s annual revisions to CPI data released on Friday, which showed monthly consumer prices rose in December instead of falling as previously estimated. In addition, one-year inflation expectations from the University of Michigan survey rose to 4.2% for the current month, from 3.9% in January.
Therefore, the market’s attention will remain focused on the latest US CPI consumer inflation figures., which will be published later at the beginning of the American session. The US CPI report will influence the Fed’s rate hike path, which in turn should boost demand for the dollar. This, coupled with the oil price dynamics, should give the USD/CAD pair some momentum and allow traders to take advantage of some short-term opportunities.
USD/CAD technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
