- A combination of factors causes aggressive selling around USD / CAD on Thursday.
- Bullish oil prices benefit CAD and put pressure amid weaker USD.
- Investors are now awaiting Canadian and US macro data for further momentum.
Intraday selling around the USD has continued through the first half of Thursday’s European session, dragging USD / CAD to new weekly lows around 1.2650 in the last hour.
After the modest bounce the day before after the FOMC, the USD / CAD pair has seen some aggressive selling on Thursday and has extended this week’s retracement drop from the 1.2900 region, in maximums of one month. This marks the third consecutive day of negative movement and is due to a combination of factors.
The Fed indicated on Wednesday that it will likely begin to reduce its monthly bond purchases towards the end of this year.. This, however, disappointed some investors who expected an immediate start to the withdrawal of the huge stimulus of the pandemic era, leading to some gains around the US dollar.
Apart of this, risk appetite in the markets has been seen as another factor that has weighed on the safe haven USD. Global risk sentiment has received a strong boost after the People’s Bank of China injected more money into the banking system, easing concerns about the fallout from the Evergrande debt crisis in China.
In fact, the DXY Dollar Index has now reversed the previous day’s positive move to month-long highs and has been further pressured by risk appetite sentiment.
In the meantime, Oil prices remained well supported by Wednesday’s bullish EIA report, which showed US crude stocks last week fell to 414 million, the lowest since October 2018. This, in turn, supported the CAD, a currency linked to commodity prices, and contributed to the strong selling tone around the USD / CAD pair.
Market participants are now awaiting Thursday’s economic calendar, highlighting the release of Canadian retail sales, initial US jobless claims and preliminary US PMI numbers. The data, coupled with USD and oil price dynamics, could provide some boost to the USD / CAD pair.
Technical levels to observe
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