- USD/CAD is moving lower on Tuesday amid the appearance of some selling around the US dollar.
- China’s problems with COVID-19 and dovish expectations around the Fed should limit the dollar’s decline.
- Falling crude oil prices could limit CAD gains and offer some support for the pair.
The pair USD/CAD is under some selling pressure on Tuesday and extends the previous day’s pullback from near the psychological 1.3500 level. The pair remains on the defensive during the first half of the European session and is currently flirting with the daily low, around the 1.3400 level.
The US dollar halts its recent strong rally move from the lowest level since August 12 and pulls back from the one-week highs reached on Monday, which in turn acts as a headwind for the USD/CAD pair. The modest drop in US Treasury yields is weighing on the dollar. Nevertheless, prevailing caution should help limit USD losses of safe haven and offer some support to the pair.
investors follow concerned about the possible economic consequences of a new outbreak of COVID-19 in China and the imposition of new lockdowns in several cities. Also, the fear of a new escalation of the conflict between Russia and Ukraine it weighs on risk sentiment. Also, hawkish signals from Fed officials, suggesting the US central bank is far from stopping its rate-raising cycle, favor dollar bulls.
On the other hand, Concern over slowing demand in China (the largest importer of crude oil in the world) should keep black gold in check. This, in turn, could weigh on the CAD, a commodity currency, and help limit the USD/CAD pair’s decline further. Traders are now looking to the economic calendar, with Canadian monthly retail sales figures and the US Richmond Manufacturing Index, to gain further momentum.
Also, Cleveland Fed President Loretta Mester’s speech will boost demand for the dollar. This, coupled with oil price dynamics, will help produce some significant opportunities around the USD/CAD pair. However, the fundamental background supports the prospects for some buying at lower levels, warranting caution before positioning for a further decline.
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.
