- A combination of divergent factors does not provide any boost to the USD / CAD.
- The USD climbs to new multi-month highs and supports the pair.
- A rebound in oil prices supported the CAD and limited gains.
The pair USD / CAD lacks a firm directional bias and remains trapped within a narrow range, just below the 1.2700 level, during the European session on Wednesday.
Following a brief consolidation during the first half of price action on Wednesday, the US dollar has regained positive traction and has rocketed to the highest level since early November 2020. This, in turn, has been seen as a key factor that has helped the USD / CAD pair attract some buying near the 1.2670-65 region.
The USD has continued to gain some support from expectations of an early tightening of monetary policies by the Fed. It’s worth remembering that the Fed hinted last week that it could start reversing its massive pandemic-era stimulus as early as November. In addition, the dot plot indicated the inclination of policy makers to raise rates in 2022.
However, a strong rally in equity markets has acted as a headwind for the safe-haven USD. Apart from this, a modest rebound in crude prices has benefited the CAD, a currency linked to commodity prices, and has limited the rise in the USD / CAD pair. This makes it prudent to wait for some continuation buying before opening new bullish positions.
Market participants are now awaiting the US economic calendar, with the only release of the pending home sales data. However, the key focus will be on the statements of the Fed chairman, Jerome Powell, at the ECB Forum on Central Banking later during the American session. This, along with US bond yields, could influence the USD.
Apart from this, investors would take clues from the oil price dynamics to seize some short-term opportunities around the USD / CAD pair. From a technical perspective, a sustained move past the 1.2700 level could trigger some short covering move and lift the pair towards the next relevant hurdle near the 1.2760 region.
USD / CAD technical levels
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